Summary IMF urges Pakistan to cap energy subsidies at Rs830B, cut circular debt by 2031; reforms include tariff hikes, subsidy cuts, and power sector privatization.
ISLAMABAD (Dunya News) – The International Monetary Fund (IMF) has asked Pakistan to limit energy sector subsidies in the upcoming budget to no more than Rs830 billion.
The IMF also urged the government to eliminate circular debt in the power sector by fiscal year 2031, recommending a gradual reduction in annual subsidies.
For the fiscal year 2026-27, Pakistan has set a target of zero circular debt accumulation in the electricity sector and has assured the IMF of faster implementation of reforms and improvement measures.
The reform package includes incremental increases in electricity and gas tariffs, subsidy reductions, privatization of the power sector, and measures to eliminate circular debt.
Electricity distribution companies are expected to be privatized or transferred to private management by early 2027.
Officials warned that while these measures aim to stabilize the energy sector, increases in electricity and gas prices could raise the cost of living for consumers.
