The International Monetary Fund has approved a subsidy of Rs830 billion for the power sector in the budget for the upcoming fiscal year 2026-27, but with it a new condition has been imposed to increase electricity prices in January 2027.
According to sources, about Rs300 billions of this subsidy
has been allocated to cover losses due to power theft and under-recovery of
bills. The IMF has clarified that electricity rates will be increased in
January next year under the annual tariff adjustment, which will also include
the effects of tensions in the global energy market, especially in the Middle
East.
The government has assured the IMF that full cost recovery
will be ensured through timely changes in electricity rates, while its burden
will be distributed in a balanced manner among different consumers.
Sources say that the approval of Rs830 billion is about 16
percent less than the government’s demand. This amount includes tariff
difference, former FATA dues, agricultural tubewells expenses and circular debt
repayment.
The government has reiterated its commitment to continue
reforms to improve the financial condition of the power sector, but the failure
to reduce circular debt despite past price increases raises questions about the
effectiveness of this program.
On the other hand, the IMF has not allowed subsidies on
petrol and diesel, even though prices are increasing globally, which experts
are calling a contradiction.The government has also promised to resolve the
dues with independent power producers by June 2026 and settle the dispute with
K-Electric by December 2026.
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