The International Monetary Fund has warned that Pakistan’s proposed electricity tariff increases must be carefully structured to avoid placing extra financial burden on middle and lower-income households. The statement comes as Islamabad reviews power sector reforms tied to its Rs. 7 billion Extended Fund Facility (EFF) program.
In discussions with Pakistani authorities, the IMF is assessing whether the proposed tariff changes are consistent with program commitments while ensuring macroeconomic stability. Officials highlighted that electricity pricing is highly sensitive in Pakistan and has a direct impact on inflation.
Analysts note that the reforms aim to reduce cost pressures on industry, yet could slightly elevate consumer prices.
“Ongoing evaluations will ensure that reforms support fiscal sustainability without adversely affecting ordinary citizens,” the IMF said.
Pakistan’s electricity sector has long struggled with circular debt, the accumulation of unpaid obligations among generation companies, distributors, and the government. The IMF noted that the buildup has remained within program targets due to improved recoveries and initiatives to reduce system losses.
While inflation has declined from nearly 40% in 2023, energy prices continue to influence the consumer price index, making tariff increases politically and economically sensitive. The ongoing EFF program is designed to help Pakistan address structural economic weaknesses and strengthen balance of payments over time.
The IMF’s caution underscores the need for a balanced approach that supports sector sustainability while protecting vulnerable households.