The International Monetary Fund has approved Pakistan’s electricity tariff reduction plan during recent discussions on the release of the next $1 billion loan installment, sources confirmed on Tuesday.
This development comes under the $7 billion, 37-month Extended Fund Facility that Pakistan signed with the IMF in July. The program aims to ensure macroeconomic stability and support inclusive economic growth. The facility involves six scheduled reviews. The release of the next installment depends on the results of the upcoming performance review.
One major goal for Pakistan under this agreement is to raise the tax-to-GDP ratio. This step is crucial to managing debt and keeping the economy stable. In 2024, salaried individuals became the third-highest taxpayers, following banks and the petroleum sector. They even surpassed textile exporters in income tax contributions.
Sources shared that the IMF held meetings with the Power Division to discuss electricity tariff reduction through tariff rebasing. The Fund directed the National Electric Power Regulatory Authority and the Power Division to coordinate decisions jointly.
As per the plan, the government is set to cut power rates by April. A proposed decrease in base tariff could go up to Rs2 per unit. If approved, the public may see a drop in electricity bills by Rs1 to Rs2 per unit starting from April or May.
Alongside electricity tariff reduction, the government also presented its roadmap for the privatization of power distribution companies (DISCOs). The IMF, however, voiced concern over the delay in privatizing at least two DISCOs by January. The Fund also showed dissatisfaction with their poor performance. It stressed that real progress in the energy sector would be impossible without improving these power companies.
Last week, the IMF rejected a request to remove the goods and services tax on electricity bills. It also refused to extend the winter relief package for industries and agriculture for the rest of the fiscal year.
Multiple relief proposals are now under review. These include tax breaks for the real estate sector, beverages, tobacco, and property markets. Moreover, the government is considering lowering taxes on salaried employees in the next budget, subject to IMF’s approval.
In a separate move under the new “power purchasing plan,” the federal government plans to slash the tariff paid for electricity from net metering consumers. The proposed cut is Rs17 per unit.
Currently, net metering allows solar panel users to reduce their electricity costs. In contrast, the suggested gross metering method would require consumers to sell all surplus power to the grid. This may happen at a lower price than the rate they pay for using electricity. The government now plans to buy electricity from such consumers at rates of up to Rs10 per unit. In the recent past, this power was bought for Rs27 per unit.
This major electricity tariff reduction push, along with energy reforms, tax adjustments, and privatization efforts, is part of the broader effort to meet IMF conditions and bring relief to the public.
