IMF assures to increase electricity and gas prices

ISLAMABAD: The government has assured the International Monetary Fund (IMF) to increase electricity and gas prices in the country.
A detailed briefing was given on energy sector reforms, circular debt reduction and future fiscal targets during the budget talks between the IMF and the government. The government has assured the IMF that electricity and gas consumer rates will be increased except for protected consumers.

Officials informed in the briefing that NEPRA’s quarterly tariff adjustments and monthly fuel charges adjustments will be implemented on time. Along with this, the government has maintained the policy of passing on the full burden of global energy prices to consumers.

According to the briefing, full cost recovery is ongoing through regular changes in petrol, electricity and gas tariffs, while targeted subsidies will continue to be provided to the vulnerable and low-income groups.

According to sources, the government is busy finalizing the settlement regarding penalty payments of IPPs, while progress is also being made towards establishing a competitive electricity market in Pakistan. The IMF was informed in the briefing that energy reforms are expected to improve the efficiency of the electricity system and reduce losses.

Meanwhile, the government has also prepared comprehensive data on audited gas circular debt and has assured to make the circular debt of the gas sector public on a quarterly basis, like electricity. According to sources, work is also underway on the gas circular debt management plan for the fiscal year 2027.

The briefing further informed that the decision to increase the basic electricity tariff will remain fully implemented from January 2027, while the target has been set to limit electricity subsidy to a maximum of Rs830 billion for the fiscal year 2027, which will be equivalent to only 0.6 percent of GDP. This subsidy will be used for DISCOs, K-Electric, FATA arrears, agricultural tube wells and circular debt payments.

According to sources, the target has been set to complete the agreements related to arrears and penalties with IPPs by June 2026, while the increase in circular debt in the fiscal year 2027 will be limited to Rs 300 billion. The government has also assured to reduce the circular debt of the power sector to zero by the fiscal year 2031.

Sources further said that the target has been set to complete the privatization process of IESCO, GEPCO and Faisalabad Electric Supply Company by the beginning of 2027.