The government has assured the International Monetary Fund (IMF) that electricity and gas prices in Pakistan will be increased, according to sources familiar with ongoing budget discussions.
Budget negotiations between the IMF and the government are currently underway, covering energy sector reforms, reduction of circular debt, and detailed briefings on upcoming fiscal targets.
Sources say the government assured the IMF that, except for protected consumers, electricity and gas tariffs will be raised. Officials briefed the IMF that NEPRA’s quarterly tariff adjustments and monthly fuel charge adjustments will continue to be implemented on time. Furthermore, the government has maintained its policy of passing the full impact of global energy prices onto consumers.
The briefing also confirmed that petrol, electricity, and gas tariffs will continue to be adjusted regularly to recover full costs, while targeted subsidies for low-income and vulnerable groups will remain in place.
The government is reportedly finalizing settlements regarding IPP penalty payments and continues progress on establishing a competitive electricity market in Pakistan. IMF officials were informed that energy reforms are expected to improve electricity system performance and reduce losses.
Additionally, the government has prepared comprehensive audited data on gas circular debt, and similar to the electricity sector, promised to publish gas circular debt on a quarterly basis. Work is also underway on a gas circular debt management plan for FY2027.
The briefing further stated that electricity base tariffs will be fully implemented from January 2027, while subsidies for FY2027 will be capped at PKR 830 billion, equivalent to just 0.6% of GDP. These subsidies will be directed towards DISCOs, K-Electric, FATA arrears, agricultural tube wells, and circular debt payments.
Sources indicate that agreements on arrears and penalties with IPPs are targeted for completion by June 2026, and the increase in circular debt for FY2027 will be limited to PKR 300 billion. The government has also assured that circular debt in the electricity sector will be eliminated by FY2031.
Finally, privatization efforts for IESCO, GEPCO, and Faisalabad Electric Supply Company are scheduled to be completed by the beginning of 2027.
