Pakistan has assured the International Monetary Fund (IMF) that electricity and gas consumers will face a fresh inflationary burden from January 2027, as the government moves toward full cost recovery in the energy sector.
Under the plan, rates will be increased for all electricity and gas consumers except protected consumers. The government has also assured the IMF that the full impact of global energy prices will be passed on to consumers through regular tariff adjustments.
Sources said consumers will be charged the full cost of petrol, electricity and gas through regular price adjustments. Quarterly tariff adjustments and monthly fuel charges adjustments for electricity will also be implemented on time.
The government economic team informed the IMF that the increase in the basic electricity tariff will be fully implemented from January 2027.
Subsidies for vulnerable groups
Officials said targeted subsidies for low-income and vulnerable groups will continue. The government has set a target to keep electricity subsidies at 0.6% of GDP.
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The targeted subsidy will be limited to Rs830 billion in the new budget.
Gas circular debt to be made public quarterly
The IMF was also briefed that, like the power sector, the gas sector’s circular debt will now be made public on a quarterly basis.
Officials said comprehensive data on audited gas circular debt has been prepared. The government has also set a target to limit the increase in circular debt to Rs300 billion in the new fiscal year.
IPP payments, DISCO privatization
The IMF delegation was briefed on the schedule for the privatization of DISCOs. Officials also said progress is being made to establish a competitive electricity market.
The government informed the IMF that settlement of penalty payments to independent power producers is being finalized. Agreements with IPPs regarding arrears and fines are targeted to be completed by June 2026.
Officials also assured the IMF that circular debt in the power sector will be reduced to zero by 2031.
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