Pakistan and IMF Resume Talks on Power Sector Reforms and Electricity Tariffs

ISLAMABAD: Pakistan has resumed policy-level talks with the International Monetary Fund (IMF) as part of efforts to secure the next $1 billion tranche under its $7 billion loan programme. A key point of discussion has been the government’s request for relief on electricity tariffs, with the IMF agreeing in principle to reduce the basic electricity tariff by Rs 1.5 to Rs 2 per unit.

However, the final decision on the tariff reduction will depend on Pakistan submitting a comprehensive privatization plan for electricity distribution companies (DISCOs) next month. The IMF raised concerns over the inefficiency and financial losses of state-owned DISCOs, urging the government to accelerate their privatization as a key condition for tariff reduction.

Pakistan has proposed a two-phase privatization plan, starting with Islamabad, Faisalabad, and Gujranwala Electric Supply Companies, followed by Multan, Lahore, and Hyderabad Electric Supply Companies. The IMF has also called for a concrete timeline for these privatizations.

Alongside electricity tariff discussions, Pakistan’s economic team is negotiating other crucial energy and taxation reforms. The IMF has proposed additional measures such as a surcharge on electricity bills and an increase in the petroleum levy to address revenue challenges and manage circular debt in the power sector.

Read more: Pakistan, IMF complete technical-level talks for next $1b tranche

These reforms are seen as pivotal for Pakistan’s economic stability and securing the vital IMF funding.