ECC extends sovereign guarantee for SNGPL's Rs50 billion loan until June 2027

The Economic Coordination Committee (ECC) has approved a one-year extension in the sovereign guarantee backing Sui Northern Gas Pipelines Limited's (SNGPL) Rs50 billion financing facility from Meezan Bank Limited, allowing the guarantee to remain valid until June 30, 2027, Business Recorder reported. 

The decision follows SNGPL's inability to repay the loan because of mounting financial pressures linked to gas sector circular debt, constrained cash flows and subsidised gas supplies.

The financing facility traces back to March 2023, when the ECC approved a sovereign guarantee to enable SNGPL to raise Rs50 billion for timely payments to Pakistan State Oil and Pakistan LNG Limited to ensure uninterrupted RLNG supplies.

The original financing was backed by a consortium comprising Allied Bank Limited, Faysal Bank Limited and National Bank of Pakistan. After one lender sought early settlement, SNGPL refinanced the entire exposure through Meezan Bank.

According to the Petroleum Division, Meezan Bank offered financing at three-month KIBOR minus 30 basis points, compared with the previous arrangement of one-month KIBOR, generating estimated annual savings of around Rs150 million.

The Finance Division issued a letter of comfort in October 2025 to facilitate the refinancing until June 30, 2026, while maintaining that SNGPL remained solely responsible for repayment of the principal and mark-up.

During the process, the Finance Division sought amendments to the guarantee document, arguing that its original structure did not qualify as a continuing guarantee under the ECC's earlier decision. Revised documents were issued in June 2026 after consultations between the two divisions.

The Petroleum Division informed the ECC that although periodic tariff revisions since November 2023 had largely contained the flow of gas sector circular debt, no dedicated mechanism existed to retire the accumulated stock, leaving gas utilities under continued financial stress.

According to the Petroleum Division, SNGPL's financial position has deteriorated due to the accumulation of circular debt, diversion of imported re-gasified liquefied natural gas (RLNG) to subsidised domestic consumers and lower revenues following reduced demand from the captive power sector.

As of December 2025, SNGPL's receivables had reached Rs1.095 trillion, while late payment surcharge liabilities stood at Rs931 billion. Of the total receivables, around Rs819 billion relates to tariff differential claims arising from government pricing decisions, including subsidised gas sales and below-cost RLNG supplies.

The ECC approved the extension of the sovereign guarantee until June 30, 2027, to support SNGPL's financing arrangements while broader reforms to address gas sector circular debt are pursued.