The IMF power subsidy Pakistan decision has allowed the government to allocate Rs830 billion for the power sector in the 2026–27 budget. The approval was granted by the International Monetary Fund, with a condition to increase electricity tariffs in January 2027. The move aims to manage rising costs and maintain financial stability in the energy sector.
According to official sources, around Rs300 billion of the subsidy will be used to cover losses caused by electricity theft and low bill recovery. These issues continue to put pressure on Pakistan’s power distribution system.
The IMF has also made it clear that electricity prices will be adjusted under the annual tariff mechanism in January 2027. This increase will consider global energy trends, including the impact of tensions in the Middle East on fuel prices.
The government has assured the IMF that timely tariff adjustments will help ensure full cost recovery. Officials said efforts will be made to distribute the financial burden fairly among different consumer groups.
However, the approved subsidy is about 16 percent lower than what the government had requested. The allocated amount includes tariff differentials, payments related to former FATA areas, support for agricultural tube wells, and partial settlement of circular debt.
Authorities have also pledged to continue reforms in the power sector to improve financial performance. Despite past increases in electricity prices, the circular debt problem has not reduced significantly, raising concerns about the effectiveness of previous measures.
On the other hand, the IMF has not allowed any subsidy on petrol and diesel, even as global fuel prices continue to rise. Experts see this as a challenging situation for both the government and consumers.
The government further committed to resolving payment issues with independent power producers by June 2026. It also promised to settle the long-standing dispute with K-Electric by December 2026.
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