ISLAMABAD: The International Monetary Fund (IMF) has approved Pakistan’s request to allocate Rs830 billion in subsidies for the power sector in the upcoming fiscal year 2026–27 budget.
However, the approval comes with a condition that electricity prices will be increased in January 2027.
According to sources, nearly Rs300 billion of the subsidy will be used to cover losses caused by electricity theft and poor bill recovery. The IMF has also emphasized that a new tariff adjustment will be implemented next year, taking into account global energy market trends, particularly tensions in the Middle East.
The government has assured the IMF that it will ensure full cost recovery through timely tariff adjustments, while distributing the financial burden across different consumer groups in a balanced manner.
Despite the approval, the sanctioned subsidy is 16% lower than what Pakistan had requested. The allocated amount includes tariff differentials, payments related to former FATA areas, agricultural tube wells, and circular debt obligations.
The government has reiterated its commitment to continuing reforms in the power sector, though past increases in electricity prices have failed to significantly reduce circular debt, raising concerns about the effectiveness of these measures.
Meanwhile, the IMF has refused to allow subsidies on petrol and diesel, despite rising global fuel prices—a decision experts have described as contradictory.
Pakistan has also pledged to resolve outstanding payments with independent power producers (IPPs) by June 2026, and to settle its dispute with K-Electric by December 2026.
