ISLAMABAD: Pakistan has provided written assurances to the International Monetary Fund (IMF) that it will phase out the existing electricity subsidy system for consumers using up to 200 units and replace it with a targeted subsidy mechanism from January 2027.
Under the proposed framework, subsidies for low-income electricity consumers will be channelled through the Benazir Income Support Programme (BISP) using data from the National Socio-Economic Registry (NSER). The move is aimed at preventing misuse of subsidised electricity tariffs and ensuring that financial assistance reaches deserving households.
The decision is expected to be politically sensitive, as many consumers currently use multiple electricity meters to keep monthly consumption below the 200-unit threshold in order to benefit from subsidised rates.
According to official sources, the government is finalising arrangements to secure the second tranche of $200 million under the IMF’s Resilience and Sustainability Facility (RSF), with the IMF Executive Board scheduled to meet on May 8 in Washington, D.C.
Officials said the new subsidy mechanism would replace the existing tariff differential subsidy and cross-subsidy structure with a more targeted and transparent framework. The government is also working closely with the World Bank to link electricity consumers with the NSER database to verify eligibility for subsidies.
To operationalise the system, the government plans to hire an external firm by the end of the current month to develop the payment and implementation mechanism for the targeted subsidy programme.
In another major reform initiative, the government has informed the IMF that it will expand the digital e-Abiana irrigation service charge system — currently implemented in Punjab — to Sindh, Khyber-Pakhtunkhwa and Balochistan by August 2027. The system is designed to improve collection of irrigation water charges through digital methods.
Pakistan is also working on establishing irrigation water tariff adjustment mechanisms in Punjab and Sindh to ensure recovery of operation and maintenance costs, with support from the World Bank. The reforms are expected to be implemented by February 2027.
Sources said the government has updated the IMF on progress made under the first review of the RSF programme. As part of the agreed reforms, the State Bank of Pakistan issued guidelines for managing climate-related financial risks in December 2025, while the Securities and Exchange Commission of Pakistan (SECP) introduced climate disclosure guidelines for listed companies during the same period.
Additionally, the government is developing a coordinated framework for federal and provincial disaster risk financing under the National Disaster Risk Financing Strategy, with completion targeted by August 2026 and technical support from the IMF.
Story by Mehtab Haider
