ISLAMABAD (Mudassar Ali Rana) – The government has finalised a plan to replace the existing electricity subsidy regime with a targeted support system under the Benazir Income Support Programme (BISP) from January 2027 as part of broader reforms agreed with the International Monetary Fund.
Sources in the Prime Minister’s Office said Pakistan has formally assured the IMF that the current power subsidy structure — including tariff differential and cross-subsidy mechanisms — will be phased out in favour of a data-driven model aimed at supporting only low-income households.
Under the new framework, electricity subsidies will be linked to verified socio-economic information available through the National Socio-Economic Registry (NSER) and BISP databases. Officials say the move is intended to improve transparency and prevent misuse of subsidies.
Authorities believe the current system has been vulnerable to manipulation, with some consumers allegedly using multiple electricity meters to remain below subsidised consumption thresholds. The new mechanism is expected to eliminate such practices by directly tying eligibility to household income data.
With technical support from the World Bank, the government is integrating electricity consumer records with the NSER database to authenticate beneficiaries. A foreign consultancy firm is also expected to be appointed later this month to develop the operational structure for subsidy disbursement.
Irrigation reforms expanded
Alongside energy sector changes, the government is accelerating irrigation reforms. Punjab’s digital “e-Abiana” system for irrigation water charges will be extended nationwide, including Sindh, Khyber Pakhtunkhwa and Balochistan, by August 2027.
Officials are also preparing measures to align irrigation water charges with operational and maintenance costs by February 2027.
IMF funding expected
Sources said Pakistan is close to securing the next tranche of IMF funding under the Resilience and Sustainability Facility (RSF). An IMF Executive Board meeting scheduled in Washington on May 8, 2026, is expected to consider approval of more than $1.2 billion for Pakistan.
The package includes $1 billion under the Extended Fund Facility (EFF) and an additional $210 million under the RSF following the second review. Pakistan and the IMF had reached a staff-level agreement in March.
Climate and fiscal reforms
The reforms come amid growing concerns over climate vulnerability following devastating floods in recent years. Under the RSF programme, the government plans to integrate climate priorities into public spending, improve water management, promote green investment and align energy policies with environmental sustainability goals.
Officials said the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan introduced climate-related financial risk guidelines in late 2025, while a comprehensive disaster risk financing framework is expected by August 2026.
Economic analysts say the reforms may be difficult in the short term but could strengthen fiscal transparency, improve subsidy targeting and support long-term economic stability.