The federal government has extended its sovereign guarantee for SNGPL‘s Rs. 50 billion financing facility until June 30, 2027. The decision was approved by the Economic Coordination Committee (ECC) after the gas utility was unable to develop a workable repayment plan.
According to the Ministry of Energy, SNGPL continues to face serious financial challenges. These include rising circular debt, weak cash flow, and long-standing structural issues in Pakistan’s gas sector.
The financing arrangement was first approved in March 2023. It was introduced to help SNGPL make timely payments for imported re-gasified liquefied natural gas (RLNG). The payments were made to Pakistan State Oil (PSO) and Pakistan LNG Limited to ensure uninterrupted gas supplies across the country.
Initially, the financing was provided through a banking consortium that included Allied Bank, Faysal Bank, and the National Bank of Pakistan. Later, the facility was refinanced through Meezan Bank after Faysal Bank requested an early settlement of its share.
The Petroleum Division informed the ECC that the revised financing arrangement offers a lower borrowing cost. Officials estimate the new structure will save SNGPL nearly Rs. 150 million every year in financing expenses.
Despite these savings, the ministry said the company remains under financial pressure. Government-directed subsidized gas sales have reduced revenue, while expensive RLNG has been supplied to domestic consumers instead of higher-paying commercial users.
Officials also pointed to declining gas demand from captive power plants. This has further affected the company’s financial position and limited its ability to repay the loan.
According to official figures, SNGPL’s total receivables had reached Rs. 1.095 trillion by December 2025. Late payment surcharges had also increased to Rs. 931 billion.
Out of the total receivables, around Rs. 819 billion are linked to tariff differential claims. These claims resulted from government pricing decisions that created a gap between the actual cost of gas and the approved consumer tariff.
The Petroleum Division told the ECC that regular gas tariff revisions introduced since November 2023 have helped slow the growth of circular debt. However, officials admitted there is still no dedicated mechanism to reduce the existing stock of debt.
To address this issue, the government has prepared a comprehensive Gas Sector Circular Debt Management Plan (CDMP). The plan was developed with support from the Task Force on Power Reforms and consultants, including KPMG.
The proposed plan has also been shared with the International Monetary Fund (IMF). The IMF has requested further clarifications before the government moves ahead with implementation.
Officials expect the management plan to be introduced during the 2026-27 fiscal year after receiving the required approvals.
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By extending the sovereign guarantee for another year, the government will allow SNGPL to continue using the financing facility while broader reforms are implemented. Officials believe these reforms are necessary to improve the financial stability of Pakistan’s gas sector and address long-term circular debt challenges.
