Karachi, Pakistan – Web Desk:
Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) to gradually reduce subsidies in the energy sector as part of ongoing economic reforms aimed at stabilizing the country’s finances.
Under the proposed plan, energy subsidies are set to decline significantly in the next fiscal year, from Rs1,186 billion to Rs830 billion. The government has agreed to limit subsidies primarily to agricultural tube wells and specific obligations in tribal areas.
As part of its commitments, Islamabad has assured the IMF of timely adjustments in electricity and gas tariffs to reflect market realities and reduce fiscal pressure. The move is expected to improve cost recovery and enhance financial sustainability in the energy sector.
The IMF has also emphasized the urgent need to tackle Pakistan’s growing circular debt in the power sector, alongside reducing electricity theft and transmission losses. In response, the government has pledged to bring the flow of circular debt to zero in the next fiscal year.
Officials confirmed that a broader reform package is underway, including measures to improve bill recovery and operational efficiency. The government has also shared plans for the privatization or private management of electricity distribution companies, with implementation expected by early 2027.
The IMF has urged Pakistan to fully eliminate circular debt in the power sector by fiscal year 2031, marking a critical benchmark in the country’s long-term economic stabilization efforts.
