Pakistan has conveyed to the International Monetary Fund (IMF) its anticipated increase in the average electricity tariff by Rs5 to Rs7 per unit in July. Despite repeated rounds of price adjustments, the country is expected to miss its target for reducing circular debt.
During ongoing discussions with the IMF regarding further engagements, the government proposed a tariff reduction for industrial consumers by transferring the burden to consumers with monthly consumption of up to 200 units. However, the IMF did not endorse this proposal.
Sources within the government revealed that the Energy Ministry informed the IMF about the potential increase in electricity tariffs due to annual base tariff adjustments. The IMF sought additional details about the assumptions behind this increase, expressing skepticism about the projected magnitude.
Despite average annual increases of Rs7 per unit over the past two years, circular debt remains unchecked. The government and IMF had aimed to limit circular debt to Rs2.310 trillion for the current fiscal year, but projections suggest it may exceed this target by Rs80 billion to Rs100 billion.
Efficiency and management within the power sector have come under scrutiny, particularly given ongoing efforts to combat electricity theft. The Energy Ministry proposed increasing electricity prices for consumers using up to 200 units through a fixed monthly surcharge, but the IMF rejected this, citing concerns about burdening domestic consumers to alleviate pressure on industrial consumers.
Previously, the IMF rejected proposals to shift the cost burden from industry to residential consumers, emphasising the need for broader reforms to address energy sector viability and fiscal sustainability.
The government’s plan involved adding fixed charges of Rs50 to Rs3,000 per month to electricity bills for all residential consumers, while protected category consumers would face surcharges ranging from Rs50 to Rs450 per connection monthly.
The IMF emphasises the importance of energy sector viability for Pakistan’s economic recovery and fiscal stability, urging comprehensive reforms to address high energy costs, improve compliance, and reduce theft and line losses.
