ISLAMABAD: The federal government is expected to allocate Rs1.079 trillion in power sector subsidies for the fiscal year *2025-26, slightly down from the *Rs1.190 trillion earmarked for FY 2024-25, according to sources in the Finance Division.
This proposed allocation was finalized during recent discussions between Pakistan’s economic team and the International Monetary Fund (IMF) Mission as part of ongoing economic reforms under the Extended Fund Facility (EFF) 2024-27.
The Finance Division has issued revised *Indicative Budget Ceilings (IDCs), earmarking *Rs636.136 billion for recurrent power sector subsidies in FY26—an increase from the earlier projection of Rs400 billion. However, it remains unclear whether the full FY25 subsidy has been consumed or adjusted.
The Finance Division has instructed the Power Division and other Principal Accounting Officers (PAOs) to adhere strictly to budgeting protocols, particularly regarding performance-based allocations under the Public Financial Management (PFM) Act, 2019 and related regulations. Key mandates include:
- Adoption of Single Treasury Account (TSA) under PFM guidelines.
- Compliance with climate-sensitive and gender-responsive budgeting.
- Preparation of quarter-wise expenditure estimates.
- Avoidance of assumptions for supplementary budget allocations.
The ministry also emphasized adherence to austerity measures and disallowed allocations under banned expenditure heads unless approved by the austerity committee.
In a recent correspondence, the Finance Division reminded the Power Division that future subsidy disbursements would be contingent upon *fiscal space availability, rejecting a proposal to release *Rs224 billion in advance to ease liquidity concerns. The Finance Division cited that Rs633 billion had already been allocated under various budgetary provisions to meet the sector’s needs.
The Corporate Finance Wing noted that final allocations for FY26 would be determined through the standard budgetary process in consultation with relevant finance divisions, keeping in view ongoing fiscal constraints and circular debt targets.
Story by Mushtaq Ghumman
