EDITORIAL: Petroleum Minister Ali Pervaiz Malik in his press conference on Sunday stated that Pakistan would begin to sell excess liquefied natural gas (LNG) in the international market from 1 January 2026. This decision, premised on lower domestic demand coupled with a gas supply glut, indicates another flawed policy decision of the 2013-18 government: the deal with Qatar was signed in 2016 amidst much fanfare by the then Petroleum Minister Shahid Khaqan Abbasi.
It is relevant to note that in spite of a repeated pledge to upload the deal on the Ministry’s website, Abbasi failed to do so — the reason being the clause that forbade either of the two contracting parties to upload the entire deal without key clauses being redacted. To this day the deal is on the Ministry’s website with these redactions.
The 2013-18 government was also responsible for the energy contracts signed under the umbrella of the China Pakistan Economic Corridor (CPEC); however, here too the contracts agreed included capacity payments, irrespective of how much was actually purchased, a clause that continues to haunt this country’s hapless power consumers to this day. While the government at the time did point out that China was the only country that had indicated any interest in investing in the country’s deficit infrastructure under President Xi’s One Belt One Road initiative; however, one would have hoped that the government’s legal team would have pointed out at the time that all previous contracts signed with the Independent Power Producers (IPPs) needed a revisit.
Failure to do so is responsible for the government’s engagement with all IPPs to revisit some clauses of the contracts with the Chinese energy players in this country, who have indicated their unwillingness to renegotiate on those contracts. In addition, due to the paucity of foreign exchange reserves, most if not all of which are debt-based, the government has not been able to meet its contractual obligation to the Chinese IPPs, allowing them to import fuel for the plants and to remit profits.
The present government has procured 1.25 trillion rupees from Pakistani commercial banks with the objective of retiring the bulk of the circular debt, a sum that no doubt would impact negatively on private sector credit, claiming that electricity price would decline, given that the discount rate today is relatively low at 11 percent. This hope did not pan out in the past when in 2013 the then Finance Minister, Ishaq Dar, borrowed a little under 400 billion rupees from 18 commercial banks to retire the circular debt, which is at present over 1.6 trillion rupees. In the event that the discount rate rises, a possibility, given that the International Monetary Fund (IMF) continues to insist in the 15 October 2025 press release titled IMF reached Staff-Level Agreement on the Second Review for the 37-month Extended Fund Facility and the First Review for 28-month arrangement under the Resilience and Sustainability Facility (RSF) that any change in the discount rate must be data-driven (with an ongoing Fund technical assistance to deal with important data shortcomings) and to maintain “an appropriately tight monetary stance, guided by incoming data, including the impact of recent floods and the evolving economic recovery, to ensure inflation remains durably within its target range of 5-7 percent.”
And finally, the 2013-18 government decision to intervene in the foreign exchange market repeatedly to prop up the value of the rupee damaged the country’s trade balance compelling the Abbasi-led government to begin negotiations with the IMF for procuring another Fund programme — an engagement that was preceded by the then Finance Minister, Miftah Ismail, devaluing the currency as per the IMF requirements. Needless to add, the policy to intervene in the foreign exchange market was continued from October 2022 to June 2013, which led to multiple exchange rates accounting for the decline of 4 billion dollars in foreign exchange reserves through remittances and the cessation of the then ongoing Fund programme. Pakistan has paid and continues to pay a heavy price for these severely flawed policies. One would hope that the government strengthens its legal team to review all contracts that are signed with foreign entities.
Copyright Business Recorder, 2025
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