In a strategic move aimed at meeting the stringent conditions of the International Monetary Fund’s (IMF) $3 billion loan program, the Pakistani government is gearing up for a substantial surge in gas prices, with projections indicating a potential 41% increase by mid-February. The decision, fuel by the imperative to address the escalating circular debt, anticipated to trigger concerns over heightened inflation in an already price-sensitive market.
The IMF underscores the significance of raising gas prices as a crucial measure to combat the burgeoning circular debt in Pakistan’s gas sector, which reached a staggering Rs 2.1 trillion by the end of FY23, constituting 2.5% of the GDP and witnessing a notable 28% year-on-year increase.
This move follows closely on the heels of a fuel price adjustment in November 2023 and marks the second such increase within a short span of three months.
Analysts estimate that state-owned gas distribution companies, including Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC), might implement gas price hikes of 41% and 15%, respectively. If realized, this would set the average price at Rs 1,753 per unit for SNGPL and Rs 1,696 per unit for SSGC.
The potential gas price increase expected to have varying impacts across consumer sectors, affecting domestic, commercial, and industrial users differently due to existing subsidy structures. The IMF recommends a uniform gas price for most consumers, advocating for the removal of cross-subsidy formulas.
Analysts highlight the positive impact of timely gas price revisions on entities like Pakistan State Oil (PSO) and Oil and Gas Development Company Limited (OGDCL), foreseeing improved liquidity and the settlement of outstanding amounts.
 $3 billion loan program, the Pakistani government is gearing up for a substantial surge in gas prices, with projections indicating a potential 41% increase by mid-February.){kind=link}