The International Monetary Fund said on Saturday it is in talks with Pakistani authorities over proposed changes to electricity tariffs, while stressing that the cost should not fall on middle and lower income households.
In a statement to Reuters, the Fund said the discussions are focused on whether the planned revisions match Pakistan’s commitments under its loan programme and how they may affect the wider economy. This includes the possible impact on inflation, which remains a major concern for both policymakers and the public.
Pakistan has proposed a major overhaul of electricity tariffs as it works to meet the conditions of its $7 billion Extended Fund Facility. Another review of the programme is approaching, and officials are trying to stay on track with agreed reforms. Analysts say the changes could raise inflation but may bring some relief to industry by adjusting how power costs are shared.
The Extended Fund Facility is a longer term lending programme used by the IMF to help countries deal with deep economic weaknesses and balance of payments problems over time.
Electricity prices play a large role in Pakistan’s inflation index. Any change in tariffs quickly affects household budgets. Although inflation has dropped sharply from its peak of nearly 40 percent in 2023, it still remains a serious political and economic issue.
Pakistan’s power sector has struggled for years with circular debt. This refers to a chain of unpaid bills and subsidies that build up between power producers, distribution companies and the government. The problem has led to repeated tariff increases under IMF supported reforms since 2023.
The IMF said the rise in circular debt has so far remained within programme limits. It added that better bill recovery and efforts to cut power losses have helped control the situation, though challenges remain as reforms continue.
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