The International Monetary Fund (IMF) has allowed Pakistan to allocate Rs. 830 billion for power subsidies in the FY2026-27 budget, while introducing a condition for an electricity tariff increase in January 2027, government sources said.
The approved subsidy includes Rs. 300 billion to cover electricity theft, poor bill recovery, and sector inefficiencies, alongside support for tariff differential claims, FATA arrears, agricultural tube wells, and circular debt repayments.
The IMF has also requested that the January 2027 annual tariff rebasing fully reflect higher generation costs, driven by recent global energy volatility and the ongoing Middle East conflict. Pakistan has accepted this as a structural benchmark under the $7 billion bailout program.
Additionally, the IMF has allowed a further Rs. 300 billion circular debt flow for FY2027, following a projected Rs. 400 billion increase in the current fiscal year, with both sides targeting circular debt resolution by 2031.
The government has assured the IMF that it will finalize arrangements with Independent Power Producers (IPPs) by the end of June 2026.
