Pakistan and the IMF will conduct virtual discussions over the FY 2025–26 budget today.

ISLAMABAD: Virtual discussions are anticipated today (Monday) between Pakistan and the International Monetary Fund (IMF) over the fiscal year 2025–26 budget.

Officials are expected to address the circular debt of the gas sector during the discussions, according to sources. “Officials from Pakistan will present the strategy for resolving the circular debt in the gas sector during virtual discussions,” sources disclosed.

The circular debt in the gas sector amounts to approximately Rs 2800 billion. Sources indicated a proposal to mitigate the gas circular debt through anticipated dividends.

The IMF has requested the data from gas industry companies. The officials will provide the five-year performance data of the gas businesses to the lender.

The monetary fund will be apprised of the profit and loss data, cash flow, and balance sheet of the gas companies, according to sources.

The administration is anticipated to present a proposal to the IMF about the gradual elimination of circular debt within a five-year timeframe, sources indicated.

Last week, budget negotiations between Pakistan and the IMF were unproductive, particularly owing to disagreements on the relief measures suggested by Prime Minister Shehbaz Sharif’s administration, according to sources.

The IMF expressed reservations on government proposals, including concerning supplementary electricity subsidies for domestic users.

It also rejected the government’s proposal to lower electricity costs for industrial consumers and insisted on prompt pricing increases in the forthcoming fiscal year.

The IMF underscored the necessity of executing a comprehensive strategy to eradicate circular debt by FY2026. This entails agreements with Independent Power Producers (IPPs) to diminish the debt by Rs348 billion.

During the discussions, the Federal Board of Revenue (FBR) sought a modification of its revenue target of Rs14.307 trillion. The IMF allegedly demonstrated some flexibility by contemplating a revised objective between Rs14.05 trillion and Rs14.1 trillion.

The Fund expressed apprehensions regarding Pakistan’s fiscal discipline, highlighting the FBR’s hesitance to elevate revenue targets amidst escalating government expenditures.

The IMF cautioned that exceeding the established expenditure limit may result in Pakistan failing to achieve its primary balance surplus target, a critical requirement of the current IMF loan program.