Pakistan has assured the International Monetary Fund (IMF) that it will continue passing global energy price fluctuations directly on to consumers through regular adjustments in electricity and gas tariffs.
The commitment was made during ongoing budget and policy discussions between Pakistani authorities and the IMF, where reforms in the energy sector, circular debt management, and fiscal targets were reviewed.
Officials briefed the IMF that electricity and gas prices will be adjusted upward for most consumer categories under a full cost-recovery mechanism. However, protected and low-income consumers will remain exempt from tariff increases.
The government also confirmed that quarterly electricity tariff revisions and monthly fuel cost adjustments will continue without delays, ensuring domestic prices reflect international market changes.
As part of the agreement, Pakistan will implement a planned increase in the base electricity tariff starting January 2027. The IMF was also informed that targeted subsidies for vulnerable groups will continue despite the broader shift toward cost recovery.
Authorities have set an electricity subsidy ceiling of Rs830 billion for FY2027, covering support for distribution companies, K-Electric, arrears linked to former FATA regions, agricultural tube wells, and circular debt-related payments.
Officials further stated that agreements with Independent Power Producers (IPPs) regarding outstanding dues and penalties are expected to be finalized by June 2026.
The government also shared that audited data on gas sector circular debt has been completed, with plans to begin quarterly public reporting, similar to the power sector.
To control fiscal pressure, Pakistan aims to cap annual circular debt growth at Rs300 billion in FY2027 and eliminate power sector circular debt entirely by FY2031.
In addition, authorities informed the IMF about ongoing plans to introduce a competitive electricity market and privatize major distribution companies, including IESCO, GEPCO, and FESCO, by early 2027.
