IMF raises concerns over Pakistan’s plan for Rs1 trillion electricity subsidy

The International Monetary Fund (IMF) has objected to Pakistan’s proposal to allocate nearly Rs1 trillion for power subsidies in the next fiscal year, including over Rs400 billion to cover electricity theft and inefficiencies.

This budget is planned in the 2026-27 fiscal year, and it aims to spend approximately Rs990 billion, which is 11 percent higher than this year’s Rs893 billion. The IMF rise was explained by officials of the power division. Losses in the area of electricity theft and distribution inefficiencies will cost the national budget over Rs400 billion.

The other Rs100 billion is comparable to cross-subsidy collections, which have high-usage consumers paying an extra Rs7 to 12 per unit. This assists the low-usage households just under 300 units every month. Among others, these are the skyrocketing interest on circular debt and unpaid K-Electric bills.

China was not ready to renegotiate power deals, restricting cost reduction. The spokesperson of a power division remained silent, saying that the finance ministry will respond since the negotiation process is ongoing. Circular debt is a huge challenge. It is estimated that it may increase by more than Rs500 billion next year, though the IMF puts a limit to growth at 300-325 billion.

Energy Minister Sardar Awais Leghari pointed out the theft and recovery losses of Rs497 billion in the previous year were not in tariffs. The money is paid by the taxpayers; last year the salaried workers paid Rs606 billion in income tax alone. In Khyber Pakhtunkhwa and Balochistan, the problem of insecurity impedes the collection of bills. IMF was doubting great Sindh losses without an explicit response. The government shifted solar policy from net metering to net billing. Consumers can sell grid power at Rs60 per unit but get just Rs9 for solar output.