IMF cautions Pakistan on power tariff change

The IMF is in discussions with Pakistani authorities over proposed electricity tariff revisions, stressing that any changes must not place financial strain on middle- or lower-income households.

The IMF said the ongoing talks will determine whether the suggested pricing adjustments align with Pakistan’s commitments under its $7 billion Extended Fund Facility (EFF) program and evaluate their potential impact on inflation.

Pakistan recently proposed renewed electricity tariffs as part of efforts to meet conditions tied to the IMF program ahead of its next review. 

According to analysts, the tariff could ease financial pressure on industry but may also contribute to higher inflation.

Electricity prices carry a major weight in Pakistan’s consumer price index, meaning any increase can quickly influence overall inflation. 

The issue remains critical even though inflation has fallen sharply from its near-40% peak in 2023, as price stability continues to be a central economic concern.

The country’s power sector has long struggled with increasing debt, a chain of unpaid bills and subsidies among power producers, distributors and the government, triggering repeated tariff adjustments under IMF-backed reform programs in recent years.

Officials say the review will focus on ensuring reforms improve the sector’s financial sustainability without unduly affecting middle and low income consumers.