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The International Monetary Fund (IMF) has rejected Pakistan’s latest proposal to introduce subsidised power tariffs for certain industrial sectors, cautioning that such incentives could deepen existing market imbalances and complicate the country’s fragile energy landscape.
Appearing before the Senate Standing Committee on Power, chaired by Senator Mohsin Aziz, Secretary Power Dr Fakhray Alam Irfan stressed that all significant power sector initiatives now require IMF approval. He pointed out that even though Pakistan is currently generating surplus electricity, particularly during the winter months, the IMF remains wary of any subsidised power tariffs that might distort the market.
In September 2024, the Power Division proposed a six-month incremental electricity consumption plan (October to March) at a marginal cost of Rs23 per kWh, tied to last year’s usage. However, after two months of talks, the IMF only gave a nod to a three-month version, citing fears of potential market distortions if extended further.
Then, in November 2024, the Power Division advanced another plan, this time suggesting marginal cost-based rates of Rs22–23 per kWh specifically for high-energy sectors, including copper and aluminium melting, data centers, and crypto mining. The government argued that subsidised power tariffs for these sectors would help absorb surplus generation and reduce hefty capacity payments. Nonetheless, the IMF rejected the plan, likening it to selective tax breaks that have previously led to economic distortions.
“As of now, the IMF has not agreed,” Dr Irfan confirmed, adding that the proposal is also under review by the World Bank and other development partners. He stressed that the government has not withdrawn the plan and continues to negotiate adjustments to address the concerns raised.
