IMF assured of semi-annual gas tariff adjustment by Feb 15, 2025

ISLAMABAD: The federal government has assured the IMF that the semi-annual gas tariff adjustment as determined by the Oil and Gas Regulatory Authority (Ogra) will be announced by February 15, 2025 and thenceforth it will be notified within 40 days to prevent further fiscal liabilities.

The Fund in its latest report “2024 Article IV Consultation and request for an Extended Arrangement under The Extended Fund Facility” noted that longstanding underpricing against a rapid depletion of indigenous natural gas effectively led to subsidizing demand for greater imports of expensive RLNG.

The energy sector has become a major point of macro-fiscal risk as circular debt (CD) spiked over fiscal year 2020–23 for gas. Pakistan began to significantly adjust tariffs in line with costs beginning in early 2023. The gas sector circular debt stood at Rs 2,083 billion (2.0 percent of GDP) by end January 2024, the fund noted.

Commitment with IMF: CPPs: Gas disconnection process begins

The government key reforms shared with the IMF focus on

(i) eliminating captive power by end January 2025 to ensure users transition to the electricity grid, thus channeling scare gas resources to more efficient gas-based power generators and reducing power generation costs,

(ii) unification of pricing, including by further implementing the weighted-average cost of gas pricing (WACOG),

(iii) introducing the automatic notification of semi-annual gas tariff determinations by the Ogra; and

(iv) via further refinements to circular debt to improve monitoring and analysis, and building on current ongoing efforts.

All prior actions have been met following the parliamentary approval of a fiscal year 2025 budget in line with the IMF staff agreement and notification of the semi-annual gas tariff adjustments.

The IMF recognized Pakistan’s most vulnerable citizens are currently shielded from gas tariff increases due to cross-subsidies within the tariff structure.

To create a more sustainable energy market in the long run, the IMF suggested gradually adjusting the tariff structure while implementing direct cash transfers through the Benazir Income Support Programme (BISP) to protect vulnerable households.

Copyright Business Recorder, 2024