By S.M. Inam
KARACHI: The International Monetary Fund (IMF) is in discussions with Pakistani authorities over proposed electricity tariff revisions, stressing that the burden should not fall on middle- or lower-income households.
“The ongoing discussions with the authorities will assess whether the proposed tariff revisions are consistent with these commitments and evaluate their potential impact on macroeconomic stability, including inflation,” the Fund said on Saturday.
The federal government recently announced a proposed overhaul of electricity tariffs, a move analysts warn could lift inflation while easing pressure on industry. The changes form part of Pakistan’s obligations under its $7 billion Extended Fund Facility (EFF), ahead of the next review of the program.
The EFF is a long-term IMF loan designed to help countries address structural economic weaknesses and medium-term balance-of-payments challenges. Electricity prices carry significant weight in the consumer price index, making any adjustments highly sensitive at a time when inflation, although sharply lower than its near-40% peak in 2023, remains politically and economically sensitive.
Pakistan’s power sector has long been burdened by circular debt—a chain of unpaid bills and subsidies across generation companies, distributors, and the government—prompting repeated tariff increases under IMF-backed reforms since 2023.
The Fund said that this accumulation of debt has been contained within program targets, supported by better recovery and loss-prevention measures. Analysts at Optimus Capital Management warned that ending a system where businesses subsidize household energy bills could trigger a 1.1 percentage point rise in inflation over 12 months.
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