The International Monetary Fund is engaging with Pakistan authorities over proposed electricity tariff revisions, emphasizing that middle- and lower-income households should not bear the brunt of increased costs.
These discussions aim to evaluate whether Pakistan’s proposed tariff changes align with IMF commitments and to assess their potential impact on macroeconomic stability, including the country’s inflation trajectory.
Pakistan announced the tariff overhaul to reduce pressure on industry while meeting conditions under its $7 billion Extended Fund Facility, ahead of another scheduled review of the program by the IMF.
The EFF is a long-term IMF loan program aimed at helping countries tackle structural economic weaknesses and address medium-term balance-of-payments challenges effectively.
Electricity prices are a significant component of Pakistan’s consumer price index, making any tariff revision highly sensitive, particularly as inflation, although lower than the near-40% peak in 2023, remains a political concern.
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Pakistan’s power sector has long struggled with circular debt, an accumulation of unpaid bills and subsidies across generators, distributors, and government entities, necessitating repeated tariff adjustments under IMF-backed reforms since 2023.
The circular debt buildup had previously constrained Pakistan’s electricity sector, leading to operational inefficiencies and delayed payments that ultimately affected both businesses and consumers.
Recent IMF discussions focus on ensuring that proposed revisions help contain circular debt while supporting sustainable recoveries and preventing future losses across the electricity supply chain.
The Fund highlighted that improved performance in revenue recoveries and loss prevention has kept circular debt within program targets, providing a stable platform for tariff adjustments.
Authorities and the IMF continue consultations to finalize revisions, balancing industry support, household affordability, and broader macroeconomic stability, with final approval pending as part of Pakistan’s EFF review cycle.
