KEY POINTS
- IMF demands zero fresh circular-debt inflow until 2031
- Govt to raise transition levy on captive power plants from 10% to 15%,
- Measure aims to collect ~Rs 105bn
- Flood damages (Rs 370 billion estimated) factored in
ISLAMABAD: As Pakistan and the International Monetary Fund (IMF) progress through second-review talks, the Fund has imposed a firm target: by 2031, the South Asian country must eliminate all circular debt in the power sector, with no new debt inflows permitted annually.
Pakistani officials briefed the IMF delegation on Islamabad’s roadmap to phase out circular debt over 3 to 6 years, noting that, after a Rs 1.2 trillion banking facility, the debt stock has been trimmed to approximately Rs 400 billion.
In parallel, Pakistan’s government has agreed to raise the transition (grid) levy on captive power plants (CPPs). For the current fiscal year, the levy is being set at 10%, and from January 2026, the rate will be increased to 15%. Officials expect this measure to generate about Rs 105 billion in revenues.
During discussions, the government also highlighted the severe economic toll from last year’s floods, estimating Rs 370 billion in damages.
Officials cautioned that this shock could drag GDP growth for the current fiscal year from earlier projections.
While acknowledging progress on structural reforms and debt resolution, the IMF stressed that strict fiscal discipline, adherence to reform benchmarks, and resilience measures remain essential to ensure sustainability.
Addressing reporters after a Senate standing committee meeting, Finance Minister Muhammad Aurangzeb said the IMF dialogue was proceeding positively.
He reiterated the government’s target of raising the tax-to-GDP ratio to 11%, and dismissed speculation about new taxes for now.
Aurangzeb also acknowledged the FBR’s first-quarter shortfall of Rs 198 billion and pointed to unresolved court cases as a possible source of extra collections.
If Pakistan and the IMF reach a consensus on pending corrective measures and structural benchmarks, the next $1 billion tranche under the Extended Fund Facility (EFF) — along with disbursements under the Resilience and Sustainability Facility (RSF) programme for fighting climate change — could be unlocked soon.
