IMF Raises Concerns Over Pakistan’s Rs. 1 Trillion Power Subsidy Plan

The International Monetary Fund (IMF) has raised concerns over Pakistan’s proposal to allocate nearly Rs. 1 trillion in power subsidies for the next fiscal year, arguing that the planned spending remains too high amid ongoing efforts to reform the energy sector, reported The Express Tribune.

Government officials told the IMF that the Power Division of Pakistan may require about Rs. 990 billion in subsidies for FY27, roughly Rs. 100 billion higher than the Rs. 893 billion allocated in the current fiscal year.

More than Rs. 500 billion of the proposed amount would cover losses from electricity theft, low bill recoveries, and operational inefficiencies in the power system.

IMF officials reportedly urged the government to bring the subsidy allocation below the current year’s level and also questioned projections for rising circular debt in the sector. The Power Division argued that additional support was needed due to higher financing costs and unresolved liabilities in the energy system.

Officials said Pakistan expects circular debt to rise by over Rs. 500 billion next fiscal year, while the International Monetary Fund wants it limited to Rs. 300–325 billion. The power sector continues to face heavy losses due to electricity theft, weak recoveries, and governance issues.

Authorities also informed the IMF that the government arranged Rs. 1.23 trillion in bank loans to manage the circular debt stock, though eliminating it before 2031 remains unlikely.