Negotiations between the International Monetary Fund (IMF) and Pakistan continued on Tuesday as both sides reviewed the federal budget framework in detail, while the IMF expressed concern over the country’s mounting gas sector circular debt, officials said.

The IMF delegation and Pakistan’s economic team are currently engaged in discussions on budget preparations and fiscal measures for the upcoming financial year.

According to sources, the IMF sought further clarification over increasing pressure on the energy sector and questioned the government’s plan to eliminate circular debt in the gas sector.

Officials said the government presented a management plan to address the issue, including a proposal to impose a Rs5 per unit levy on gas.

The government also proposed reducing debt through dividends from state-owned companies and suggested selling 35 LNG cargoes annually in the international market.

Officials said the LNG sales plan could generate around Rs160 billion per year.

Authorities further informed the IMF that improved recovery by Sui Northern Gas Pipelines Limited and Sui Southern Gas Company could help secure an additional Rs61 billion in collections.

Despite the proposals, IMF officials raised key questions regarding the viability of the gas circular debt reduction plan, sources added.

Officials said the gas sector’s circular debt had surged to nearly Rs3.4 trillion, while around Rs150 billion remained payable to companies, including Oil and Gas Development Company Limited and Pakistan Petroleum Limited.

Authorities said talks between the IMF and the government would continue until budget proposals are finalised.