The International Monetary Fund has turned down Pakistan’s latest proposal to introduce subsidised electricity tariffs aimed at crypto mining and certain heavy industries, warning that such sector-specific incentives could exacerbate long-standing distortions in the country’s troubled power sector. The development highlights growing friction between Pakistan’s efforts to utilize surplus electricity and the IMF’s insistence on market-driven reforms.
Speaking before the Senate Standing Committee on Power, Secretary Power Dr Fakhray Alam Irfan confirmed that the IMF has declined to support the proposed tariff model, which sought to stimulate energy consumption by offering targeted lower rates. Dr Irfan explained that all significant initiatives within Pakistan’s power framework require the IMF’s clearance, especially under the current economic adjustment programs. While Pakistan enjoys surplus electricity during off-peak seasons like winter, the IMF remains wary of artificially altering pricing structures that could disrupt natural demand and supply dynamics.
Back in September 2024, the Power Division pitched a six-month incremental consumption plan at marginal cost pricing of Rs 23 per kWh to run from October through March. However, after two months of discussions, the IMF only greenlighted a curtailed three-month version, citing risks of distorting the broader market. Seeking to expand relief, the Power Division in November floated a refined proposal offering tariffs in the Rs 22–23 per kWh range specifically for energy-intensive operations like copper and aluminium smelting, data centers, and crypto mining. Authorities argued that encouraging these sectors would help absorb surplus power, reduce capacity payments, and unlock economic activity. Despite these justifications, the IMF viewed the move as similar to past tax holidays that created market imbalances and ultimately rejected it.
Dr Irfan stressed that while the IMF has not accepted the plan, it remains under discussion with the World Bank and other development partners. The government is still exploring ways to tweak the framework to make it acceptable to international lenders.
Meanwhile, the Senate committee session also laid bare serious concerns about Pakistan’s ballooning power sector debts and structural inefficiencies. Senator Shibli Faraz criticized a recent government deal with commercial banks to manage the circular debt, alleging that banks were pressured into compliance, which could saddle consumers with future financial burdens. Dr Irfan refuted the claim, clarifying that no fresh levies were introduced and that the existing Debt Servicing Surcharge of Rs 3.23 per kWh would continue for the next five to six years to recover obligations. He pointed out that timely subsidies have already helped slow the growth of circular debt.
Committee members also raised alarms over frequent load shedding, even in areas with paying customers. They heard reports of daily outages lasting up to 14 hours in districts like Tharparkar and Matiari. Accusations surfaced of corruption among local officials who allegedly take bribes to restore disconnected lines. Dr Irfan responded by explaining that load shedding largely stems from regions with over 20% losses due to theft, and highlighted a tragic case where a SEPCO staffer was fatally attacked during a disconnection drive.
To combat inflated billing, Dr Irfan noted that over 500,000 consumers have downloaded the government’s “Apna Meter Apni Reading” app, with 250,000 actively submitting meter photos. This initiative, he said, aims to tighten billing transparency and will soon be extended to K-Electric users.
As deliberations wrapped up, the committee voiced frustration over evasive responses from the Power Division on long-standing issues like Independent Power Producers’ excess profits and systemic delays in upgrading faulty feeders. The members directed the department to present comprehensive answers in the next session, underscoring the urgent need for credible reforms in Pakistan’s power landscape.
