Talks underway to assess whether tariff revisions meet commitments and affect inflation, macroeconomic stability: Fund
ISLAMABAD, FEB 14 /DNA/: The International Monetary Fund is discussing proposed electricity tariff revisions with Pakistan authorities, the fund said in a statement to Reuters on Saturday, adding that the burden of the revisions should not fall on middle or lower income households.
“The ongoing discussions with the authorities will assess whether the proposed tariff revisions are consistent with these commitments and evaluate their potential impact on macroeconomic stability, including inflation,” it said in its statement.
The federal government announced a proposed tariff overhaul that analysts said would lift inflation while easing pressure on industry, as it seeks to meet conditions under its $7 billion Extended Fund Facility (EFF) ahead of another review of the programme.
The EFF is a longer term IMF loan programme designed to help countries address deep seated economic weaknesses and medium term balance of payments problems.
Electricity carries significant weight in the consumer price index, making tariff adjustments highly sensitive at a time when inflation, though sharply lower than its near-40% peak in 2023, remains a key political and economic pressure point.
The power sector has long been weighed down by circular debt — a chain of unpaid bills and subsidies that accumulates across generation companies, distributors, and the government — prompting repeated tariff increases under IMF-backed reforms since 2023.
The accumulation of power sector circular debt has been contained within programme targets, supported by improved performance on recoveries and loss prevention, the Fund added.
Hard on households, helpful to industries
The plan, ending a system where businesses subsidised household energy bills, could trigger a 1.1 percentage point jump in inflation over 12 months, analysts at Optimus Capital Management said.
Analysts say the plan, which only needs formal approval to come into effect, will cause industrial prices to fall between 13% and 15% and remove 102 billion ($365 million) rupees in subsidies.
That means middle-class households will have to pay roughly 50% more for power, the analysts estimated.
