Pakistan has assured the IMF it will raise electricity tariffs and cap subsidies at 830 billion rupees. The move aims to stabilize public finances amid global energy shocks and fiscal pressure. Consumers and businesses across the country will face higher power costs under the new policy.
The government made the commitment during engagement with the International Monetary Fund under a $7 billion Extended Fund Facility. Officials said timely tariff adjustments would offset rising global energy prices. These pressures intensified after recent Gulf conflicts disrupted international energy markets. As a result, authorities are prioritizing fiscal discipline to secure continued external financing.
Read more: Pakistan assures IMF on higher electricity tariffs, limits subsidy
Moreover, the government plans to implement a new base electricity tariff starting January 15, 2027. This step aligns with structural benchmarks agreed under the IMF program. Policymakers believe predictable tariff adjustments will reduce circular debt and improve sector efficiency. However, higher electricity prices are expected to increase inflationary pressure on households and industries.
At the same time, reforms in the power sector remain delayed. The privatization of major distribution companies, including IESCO, GEPCO, and FESCO, has not progressed as planned. Officials now expect the process to conclude in early 2027. Analysts say delays could slow efficiency gains and prolong financial losses in the sector.
Read more: IMF urges Pakistan to maintain tight monetary policy amid ME conflict
Nevertheless, the government maintains that subsidy limits are essential for long term stability. It argues that targeted relief measures will protect vulnerable consumers from severe impacts. Further details on subsidy allocation are expected in the upcoming federal budget announcement.