Pakistan prepares for IMF’s $1 billion fifth tranche

Islamabad: Talks with the International Monetary Fund (IMF) for the release of the next loan tranche are scheduled to take place in Islamabad next month. However, the rising circular debt in the power sector has emerged as a major challenge for the government.

According to details, review talks between Pakistan and the International Monetary Fund (IMF) are expected to be held in Pakistan next month. However, the increase in power-sector circular debt has become a significant challenge for the government.

Sources said that the power-sector circular debt has exceeded the IMF-set limit by Rs130 billion. The IMF had set a target of keeping the circular debt in the power sector limited to Rs1,600 billion.

According to sources, the circular debt increased further due to rising energy prices amid the US-Iran war.

During the talks with the IMF, the government will discuss targets related to energy-sector reforms including circular debt in the electricity and gas sectors. Pakistan will also brief the IMF on its progress toward achieving economic reform targets.

According to sources, the Prime Minister has directed the economic team to prepare an alternative plan instead of further increasing electricity prices.

Pakistan will brief the IMF on the targets set under the structural benchmarks. If the talks are successful, they will pave the way for the release of the fifth tranche under the current loan programme.

According to sources, Pakistan could receive approximately $1 billion as the fifth tranche. In addition, Pakistan may receive around $200 million in additional funding to help address losses caused by climate change.