IMF Warns Power Tariff Increases Must Not Burden Ordinary Pakistanis

The International Monetary Fund (IMF) is reviewing Pakistan’s proposed electricity tariff revisions, cautioning that any increase should not place additional burden on middle and lower-income households as the country moves forward with power sector reforms.

In a statement to Reuters, the IMF said ongoing discussions with Pakistani authorities will assess whether the proposed tariff adjustments align with program commitments and evaluate their impact on macroeconomic stability, particularly inflation.

Pakistan recently proposed an overhaul of electricity tariffs, a move analysts say could increase inflation while easing cost pressures on industry. The reforms are part of efforts to meet conditions tied to the country’s Rs. 7 billion Extended Fund Facility program.

The Extended Fund Facility is a longer-term financing arrangement designed to help countries address structural economic weaknesses and balance of payments challenges over time.

Electricity pricing remains a sensitive issue in Pakistan, where it holds significant weight in the consumer price index. Although inflation has declined from its nearly 40 percent peak in 2023, it continues to pose economic and political challenges.

The country’s power sector has long struggled with circular debt, a buildup of unpaid obligations across generation companies, distributors, and the government. This has led to repeated tariff adjustments under IMF-backed reform programs since 2023.

The IMF noted that the accumulation of circular debt has remained within program targets, supported by improved recoveries and efforts to reduce system losses.