KARACHI:
The International Monetary Fund is discussing proposed changes to electricity prices 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 evaluate their potential impact on macroeconomic stability, including inflation,” it said in its statement.
Pakistan announced a proposed tariff review that analysts said would lift inflation while easing pressure on industry as it seeks to meet conditions under its $7 billion Extended Fund Facility (EFF) as another review of the program looms.
The EFF is a longer-term IMF loan program designed to help countries address deep-seated economic weaknesses and medium-term balance of payments problems.
Electricity has a significant weight in Pakistan’s consumer price index, making tariff adjustments highly sensitive at a time when inflation, while markedly lower than its near 40% peak in 2023, remains a major political and economic pressure point.
Pakistan’s electricity sector has long been burdened by circular debt – a chain of unpaid bills and subsidies that build up across generation companies, distributors and the government – prompting repeated tariff hikes under IMF-backed reforms since 2023.
The accumulation of the electricity sector’s circular debt has been contained in the program objectives, supported by improved performance in terms of recoveries and loss prevention, the fund added.
