Power sector subsidies surge by 400% in five Years: World Bank 

ISLAMABAD: The World Bank has revealed that the power sector subsidies in Pakistan have increased by a staggering 400% in the last five years, putting a major burden on the federal government’s finances, ARY News reported.

According to the World Bank report, the growing number of protected consumers has contributed to the surge in subsidy burden, with 94% of domestic consumers benefiting from the budgetary subsidy in 2024.

The power sector subsidy has climbed from Rs. 236 billion in the financial year 2020 to Rs. 1190 billion in the current financial year, a staggering increase of Rs. 954 billion.

The inability to reduce losses and poor recovery of electricity bills have contributed to the circular debt, which has averaged Rs. 400 billion annually for the past four years despite reforms.

The World Bank has warned that the increasing electricity tariffs and poor revenue collection will continue to exacerbate the circular debt crisis, making it essential for the government to address the underlying issues in the power sector to reduce the subsidy burden and circular debt.

READ: World Bank concerned over Pakistan’s power sector circular debt

Earlier, the World Bank (WB) expressed concerns over the rise in Pakistan’s power sector circular debt despite historic hike in electricity tariffs.

The World Bank stated in its report that over the past six years, the debt has increased by 1241 billion rupees, with an increase of 1128 billion rupees between 2019 and 2021.

The World Bank reported that the power sector’s circular debt has been growing at an alarming rate, with a notable increase of 113 billion rupees between 2022 and 2024.

As of 2024, the total volume of circular debt in Pakistan’s power sector has reached 2393 billion rupees.

The World Bank emphasized the need for reforms to address the circular debt problem.