Pakistan to End 200-Unit Power Subsidy Scheme on IMF Demand

Pakistan has given written assurances to the International Monetary Fund that it will scrap its existing electricity subsidy structure for low-usage consumers and replace it with a targeted support mechanism from January 2027, as the government pushes ahead with power-sector reforms tied to external financing.

Under the planned overhaul, subsidies for households consuming up to 200 units of electricity will be phased out and replaced with a targeted system linked to data from the Benazir Income Support Programme.

The new framework is intended to direct relief toward low-income households and curb abuse of the current model, under which some consumers have reportedly installed multiple meters to keep usage below the subsidized threshold.

The commitment comes as Pakistan is set to receive the second tranche of $200 million under the Resilience and Sustainability Facility, with the IMF Executive Board scheduled to meet on May 8 in Washington to consider the disbursement.

Sources said the government is developing the new subsidy mechanism in coordination with the World Bank, which will help link electricity users with the National Socio-Economic Registry database. The targeted subsidy system is expected to be introduced after verification checks and payment arrangements are put in place.

The government plans to hire an external firm by the end of this month to design the payment mechanism for the subsidy, the officials said.

Alongside the electricity reforms, Pakistan has also committed to expanding its digital e-Abiana irrigation service charge system to Sindh, Khyber Pakhtunkhwa and Balochistan in the next financial year after its rollout in Punjab. The nationwide expansion is due to be completed by the end of August 2027.

The government is also working with the World Bank to introduce irrigation water tariff adjustment mechanisms in Punjab and Sindh by February 2027 to improve recovery of operations and maintenance costs.

The measures form part of a broader package of reforms shared with the IMF under the first review of the Resilience and Sustainability Facility program. As part of those commitments, the State Bank of Pakistan issued guidelines in December 2025 for the management of climate-related financial risks, while the Securities and Exchange Commission of Pakistan introduced guidance for listed companies on disclosing climate-related risks and opportunities in the same month.

Pakistan has also told the IMF it is moving toward a framework for coordinating federal and provincial disaster risk financing needs under a national disaster risk financing strategy, with the aim of finalizing it by the end of August 2026.

Govt can go at any length to protect the ipps