Govt Approves IMF Demand to Make Electricity More Expensive Next Fiscal Year

Pakistan and the International Monetary Fund (IMF) have agreed that electricity tariffs will be increased through annual rebasing from July 2025 if the power sector’s subsidy exceeds Rs. 1.036 trillion in FY2025–26. This includes Rs. 182 billion from the Petroleum Development Levy-funded PM’s package. The target is to maintain zero circular debt flow within this ceiling. Any additional financial needs will be met through tariff adjustments, while keeping a progressive rate structure. The IMF has capped total power subsidies at 0.8 percent of GDP and linked them to targets for circular debt stock clearance and loss reduction. The Finance Division has revised FY2025–26 budget ceilings, raising sector subsidies to Rs. 636.1 billion under the recurrent budget, up from Rs. 400 billion. The overall subsidy for FY2025 is expected to exceed Rs. 1.2 trillion, mainly due to rising protected consumer counts and circular debt costs. Subsidy pressure is growing as more households shift below the 200-unit protected threshold, often by using solar power. At the same time, falling industrial and commercial demand is weakening cross-subsidy flows. Tariff adjustments and rebasing remain under consideration, though political and industrial pushback limits flexibility. The Finance Division has directed strict compliance with budget rules in preparing FY2025–26 cost estimates.