The International Monetary Fund (IMF) has allowed Pakistan to allocate Rs. 830 billion for power subsidies in the FY2026-27 budget, while also introducing a new condition requiring an electricity tariff increase in January 2027.
According to government sources, the approved subsidy amount includes Rs. 300 billion to cover electricity theft, poor bill recovery, and sector inefficiencies, in addition to support for tariff differential claims, FATA arrears, agricultural tube wells, and circular debt repayments.
The lender has also asked Pakistan to ensure that the January 2027 annual rebasing fully reflects higher generation costs arising from recent global energy market volatility and the impact of the Middle East conflict. The government has accepted this as a new structural benchmark under the $7 billion bailout program.
The IMF has also allowed a further Rs. 300 billion circular debt flow for FY27, after a projected Rs. 400 billion increase in the current fiscal year, while both sides continue to target the resolution of circular debt by 2031.
The government has also assured the IMF that it will finalize arrangements with Independent Power Producers by the end of June 2026.
