KARACHI:
The International Monetary Fund is discussing a proposed revision of electricity tariffs with Pakistani authorities, the fund said in a statement to Reuters on Saturday, adding that the burden of the revisions should not fall on middle- or low-income households.
“Ongoing discussions with the authorities will assess whether the proposed tariff revisions are consistent with these commitments and assess their potential impact on macroeconomic stability, including inflation,” the statement said.
Pakistan has announced a proposed tariff review that analysts say would increase inflation while easing pressure on industry, as it seeks to fulfill the conditions of its $7 billion Expanded Financing Facility (EFF), ahead of another review of the program.
The EFF is a long-term IMF loan program designed to help countries address deep-rooted economic weaknesses and balance of payments problems over the medium term.
Electricity weighs heavily in Pakistan’s consumer price index, making tariff adjustments very sensitive at a time when inflation, although significantly below its peak of nearly 40% in 2023, remains a key political and economic pressure point.
Pakistan’s power sector has long been weighed down by circular debt – a chain of unpaid bills and subsidies that pile up between generation companies, distributors and the government – causing repeated tariff increases under IMF-backed reforms since 2023.
The accumulation of circular debt in the electricity sector was contained within the program objectives, supported by better performance in recovery and loss prevention, the Fund added.
