Pakistan has assured the International Monetary Fund (IMF) that it will phase out the current electricity subsidy system for low-consumption households and replace it with a more targeted support mechanism beginning in January 2027 as part of ongoing power sector reforms linked to international financing.
Under the proposed changes, subsidies currently available to consumers using up to 200 electricity units per month will gradually be discontinued. In their place, the government plans to introduce a targeted subsidy model connected to data from the Benazir Income Support Programme to ensure assistance reaches genuinely low-income households.
Officials said the move is intended to reduce misuse of the existing subsidy structure, where some consumers reportedly use multiple electricity meters to remain within the subsidized consumption limit.
The commitment comes ahead of Pakistan’s expected release of the second $200 million tranche under the IMF’s Resilience and Sustainability Facility. The IMF Executive Board is scheduled to meet on May 8 in Washington to review the disbursement request.
Sources said the government is developing the new subsidy framework in collaboration with the World Bank. The system will integrate electricity consumer data with the National Socio-Economic Registry to verify eligibility and streamline support payments.
To support implementation, the government plans to appoint an external firm by the end of the month to design the payment and distribution mechanism for the targeted subsidy program.
Alongside electricity sector reforms, Pakistan has also committed to expanding its digital e-Abiana irrigation service charge system beyond Punjab to Sindh, Khyber Pakhtunkhwa, and Balochistan during the next fiscal year. The nationwide rollout is expected to be completed by August 2027.
The government is further working with the World Bank on introducing irrigation water tariff adjustment mechanisms in Punjab and Sindh by February 2027 to improve cost recovery for operations and maintenance.
These initiatives are part of a broader reform agenda shared with the IMF under the first review of the Resilience and Sustainability Facility programme. As part of these commitments, the State Bank of Pakistan issued climate-related financial risk management guidelines in December 2025, while the Securities and Exchange Commission of Pakistan introduced guidance for listed companies on climate-risk disclosures.
Pakistan has also informed the IMF that it is developing a national disaster risk financing strategy aimed at improving coordination between federal and provincial governments, with plans to finalize the framework by August 2026.
