IMF demands of Pakistan curtailing power subsidy in next budget

ISLAMABAD: The International Monetary Fund (IMF) has demanded of Pakistan to slash the power subsidy in the next financial year to Rs 830 billion, sources said.

As the Pakistan and the IMF preparing to set key targets of the next fiscal year’s budget, the lender has demanded Rs 206 billion rupees cut in the electricity subsidy in the budget, according to sources. “The energy sector’s subsidy should not be more than 830 billion in the next budget,” the IMF has demanded of Pakistan.

“The current year’s subsidy to the power sector has been 1036 billion rupees,” sources shared.

Sources said that the IMF has also demanded to end the circulatory debt of the power sector by the financial year 2031.

The international monetary fund has demanded of gradually decreasing the subsidy to the energy sector on the yearly basis.

The circulatory debt flow of the power sector in fiscal year 2026-2027 has been fixed at zero.

Sources said that the lending institution has been assured of improvement in the energy sector and implementation of the reforms package.

Under the reforms package the power and gas rates will be continuously increased and the subsidy in the sector will be reduced, according to sources.

According to documents substantial steps are suggested for privatization in the power sector and settlement of the circulatory debt.

The power distribution companies’ privatization or transfer to the private sector has been expected by the beginning of the year 2027.

The consumers likely to shoulder more burden with hike in the power and gas tariffs, sources added.