IMF sets deadline for Pakistan to end power sector circular debt

The International Monetary Fund (IMF) has given Pakistan until 2031 to completely eliminate circular debt in the power sector. The Fund has also placed a condition of achieving zero annual flow of new circular debt, meaning no fresh debt can be added each year.

According to sources, the IMF has asked Pakistan to prepare a revised Circular Debt Management Plan to gradually phase out the current stock of debt.

In addition, the IMF has introduced a Grid Transition Levy on off-grid captive power plants. The levy will begin at 10% immediately, rise to 15% in January 2026, and reach 20% by August 2026. The government expects to collect Rs. 105 billion from captive power plants during the current fiscal year through this levy.

Meanwhile, sources revealed that the recent floods have caused economic losses of Rs. 370 billion, damaging agriculture and infrastructure across the country.

As a result, Pakistan’s growth target for FY2025-26 has been revised down from 4.2% to 3.9%.

The country will also need around $26 billion in external financing this fiscal year, out of which nearly $12 billion is expected to come through rollovers, sources added.

Read More: Pakistan Reports Rs371 Billion Flood Losses, GDP Growth Cut to 3.9%