Islamabad Capital Territory

Islamabad | ReNews Pakistan
Pakistan expects to receive around $530 million from the International Monetary Fund in climate related financing during the current fiscal year 2026,27, according to sources in the Ministry of Finance.

The Finance Ministry has included the anticipated climate financing inflows in the government’s annual borrowing plan for the current fiscal year.

According to the sources, the projected $530 million in climate financing will be separate from the funds Pakistan is receiving under the IMF’s $7 billion loan programme.

The expected inflows have been incorporated into the annual financing framework as part of the government’s external borrowing projections for FY2026,27.

Sources said the inclusion of climate financing in the annual borrowing plan reflects the government’s expectation that additional IMF linked funds will become available during the fiscal year for climate related financing requirements.

The climate financing component is expected to supplement Pakistan’s broader external financing needs while remaining separate from disbursements under the main IMF programme.

Islamabad | ReNews Pakistan
The federal government has devised a mechanism to recover more than Rs 110 billion in outstanding electricity dues from the provinces by deducting the amounts from their shares under the National Finance Commission award, as financial pressures in the power sector continue to mount.

According to sources, the Power Division and Finance Division have reached an understanding on the mechanism for making deductions against provincial electricity arrears, with around Rs 50 billion planned to be recovered in the initial phase.

The government has also informed the International Monetary Fund about the proposed arrangement.

Sources said the IMF, however, raised concerns over the possible fiscal impact of deducting electricity dues directly from provincial NFC shares, noting that provincial revenues were already under pressure and further deductions could aggravate their financial difficulties.

The total verified electricity arrears owed by the provinces have crossed Rs 110 billion, according to sources, while the government is seeking to recover around Rs50 billion at an early stage.

Separately, fiscal targets involving a cash surplus of Rs 1.7 trillion from the provinces and Rs 1.036 trillion in cash grants are also under consideration as part of the broader fiscal framework.

The issue comes as circular debt in the power sector has also increased. According to a briefing given by the Power Division to the IMF, electricity sector circular debt rose by Rs 61 billion during the previous financial year, taking the total stock to around Rs 1.675 trillion.

Sources attributed the increase partly to subsidy related adjustments and payment disputes involving electricity distribution companies.

The IMF has also raised concerns over what it considers insufficient use of available savings to reduce the circular debt burden.

Meanwhile, the Power Division is proceeding with the installation of smart meters to address recurring billing disputes between provincial governments and electricity distribution companies.

The initiative is intended to provide a more permanent mechanism for resolving disagreements over provincial electricity consumption and billing.

The issue of a uniform electricity tariff after the privatisation of distribution companies also came under discussion during talks with the IMF.

Sources said the Fund sought clarity on whether the existing uniform tariff policy would continue after privatisation of the distribution companies or be discontinued, but no definitive position was communicated by the government.

At present, consumers served by both relatively efficient and inefficient distribution companies are covered under the uniform tariff policy.

The timeline for privatisation of power distribution companies and the policy framework to be followed after their privatisation were also discussed.

Sources said an attempt had earlier been made to deduct more than Rs 6 billion a month from Khyber Pakhtunkhwa’s share, but the amount could not be debited through the central bank because the provincial government did not provide the required debit authority.

The IMF has continued to stress the need for a sustainable solution to power sector circular debt, improvements in electricity distribution and stronger fiscal discipline.

Islamabad | ReNews Pakistan
The federal government has amended the State Owned Enterprises Ownership and Management Policy 2023 as part of implementation of another condition linked to Pakistan’s programme with the International Monetary Fund (IMF), revising financial reporting and internal audit requirements for state owned entities.

The Finance Division issued a notification following approval of the amendments by the federal cabinet.

Under the revised policy, financial reporting standards notified from time to time by the Securities and Exchange Commission of Pakistan (SECP) under Section 225 of the Companies Act 2017 will apply to all state owned enterprises covered by the SOEs Act 2023.

The amendment clarifies that, for the purposes of the SOEs Act, references to International Financial Reporting Standards will mean the financial reporting standards notified by the SECP for state owned enterprises in accordance with the Companies Act.

However, entities regulated by the State Bank of Pakistan will continue to follow the statutory financial reporting framework prescribed by the central bank under the Banking Companies Ordinance 1962.

The framework includes circulars, directives and other instructions issued by the SBP, which will take precedence in the event of any inconsistency with other financial reporting requirements.

Under the newly inserted Clause 31-B, any modification, exemption or relaxation granted by the SECP to companies under Section 225 of the Companies Act 2017 in relation to implementation of IFRS will also apply to state owned enterprises registered with the commission.

The amendment, however, makes clear that the provision will not affect the statutory powers of the State Bank of Pakistan. In matters falling within the central bank’s legal mandate, requirements issued under the State Bank of Pakistan Act 1956 will prevail.

The revised policy has also introduced Clause 31-C, requiring the Finance Division, in consultation with the Auditor General of Pakistan, to issue a detailed financial management framework for statutory state owned enterprises.

The framework is expected to provide greater clarity regarding financial governance, accounting requirements and management controls applicable to statutory SOEs.

The notification further requires all state owned enterprises to establish internal audit procedures and mechanisms in accordance with Sections 19 and 20 of the SOEs Act.

The amendments are aimed at bringing financial reporting and governance requirements of state owned enterprises under a more clearly defined regulatory framework while preserving the statutory authority of regulators, particularly the State Bank of Pakistan, over entities operating within their respective jurisdictions.