IMF Sets Deadline to Eliminate Power Sector Circular Debt

The International Monetary Fund (IMF) has set 2031 as the deadline for Pakistan to completely eliminate circular debt in the power sector. The Fund has also imposed a condition requiring a zero annual flow of circular debt. Sources told ProPakistani that the IMF has requested a revised Circular Debt Management Plan to phase out the existing stock of circular debt. The IMF has also mandated a Grid Transition Levy on off-grid captive power plants, starting at 10%, effective immediately. The levy will increase to 15% from January 2026 and 20% from August 2026. The government aims to collect Rs. 105 billion from captive power plants in the current fiscal year under this levy. Separately, sources said the recent floods have caused an estimated economic loss of Rs. 370 billion, severely damaging infrastructure and the agriculture sector. Due to these shocks, Pakistan’s growth target for FY2025-26 has been revised down from 4.2% to 3.9%. The country will also require $26 billion in external financing during the ongoing fiscal year, of which $12 billion is expected to be rolled over, sources added.