The International Monetary Fund has raised questions about Pakistan’s plan to allocate around Rs1 trillion in electricity subsidies in the upcoming fiscal budget. Officials from the global lender believe the proposed amount may put extra pressure on the country’s finances and slow down reforms in the power sector.
According to reports, the government has proposed increasing financial support for electricity consumers to ease the burden of high power tariffs. A large share of the subsidy is expected to cover losses caused by electricity theft, unpaid bills, and technical inefficiencies in the distribution system. These issues have long affected Pakistan’s power sector and contributed to rising circular debt.
The IMF has suggested that the subsidy should remain below the current level, which is around Rs893 billion. The organization believes that continuing large subsidies could weaken efforts to control debt in the power sector and make it harder for Pakistan to maintain financial discipline under its economic reform program.
Another concern raised during discussions is the expected rise in circular debt, which occurs when power companies cannot recover their full costs. Government estimates suggest that the debt could increase by more than Rs500 billion if losses and weak bill recovery continue.
However, the IMF prefers a lower target to prevent the problem from growing further. Negotiations between Pakistani officials and the IMF are still ongoing. The final decision on subsidy levels will likely be made during budget discussions, as the government tries to balance public relief with financial stability.