IMF approves Rs830 billion power subsidy for Pakistan

ISLAMABAD: The International Monetary Fund (IMF) has allowed Pakistan to allocate Rs830 billion for the power sector in the 2026–27 budget.

However, this approval comes with a condition. The annual tariff system will increase electricity prices in January 2027. The step is aimed at managing rising costs and keeping the energy sector financially stable.

According to official sources, about Rs300 billion from the subsidy will be used to cover losses caused by electricity theft and poor bill recovery. These problems continue to put pressure on the country’s power system.

The IMF has also said that future electricity prices will be adjusted based on global energy trends. This includes the impact of rising fuel prices due to tensions in the Middle East.

The government has assured the IMF that timely increases in tariffs will help recover full costs. Officials also said they will try to share the financial burden fairly among different consumers.

However, the approved subsidy is about 16% lower than what the government had requested. The amount will cover different needs, including tariff gaps, support for former FATA areas, help for agricultural tube wells, and partial payment of circular debt.

Authorities have promised to continue reforms in the power sector to improve its financial condition. Despite previous price increases, the circular debt issue still remains a major concern.

On the other hand, the IMF has not allowed any subsidy on petrol and diesel, even as global fuel prices continue to rise. Experts say this will be a difficult situation for both the government and the public.

The government has also promised to resolve payment issues with independent power producers by June 2026. It further assured that the long-standing dispute with K-Electric will be settled by December 2026.