The International Monetary Fund is in discussions with Pakistani authorities regarding proposed revisions to the nation’s electricity tariffs, a move that could unlock further funding under a $7 billion Extended Fund Facility (EFF). The IMF stated on Saturday that any tariff adjustments must not disproportionately burden middle- and lower-income households.
The proposed overhaul, announced by the Pakistani federal government, is intended to address long-standing issues within the power sector, including substantial circular debt – a complex web of unpaid bills and subsidies. Analysts predict the tariff changes will likely contribute to inflationary pressures, while simultaneously offering some relief to the country’s industrial sector.
“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,” the IMF said in a statement to Reuters.
Pakistan’s economic program, supported by the EFF, aims to address deep-seated economic weaknesses and balance-of-payments problems. The country recently reached a staff-level agreement with the IMF in October 2025 for a $1.2 billion payout, comprising $1 billion under the EFF and $200 million under the Resilience and Sustainability Facility (RSF). The IMF Executive Board completed its second review of the EFF and first review of the RSF in December 2025, allowing for the disbursement of approximately $1 billion under the EFF and $200 million under the RSF.
Electricity costs hold significant weight in Pakistan’s Consumer Price Index (CPI), making adjustments to tariffs a politically sensitive issue. While inflation has decreased from a peak of nearly 40% in 2023, it remains a key concern for the government. The power sector has been plagued by circular debt, prompting repeated tariff increases under IMF-backed reforms since 2023. The IMF noted that the accumulation of this debt has been contained within program targets, aided by improvements in recovery rates and loss prevention.
The IMF acknowledged in its October 2025 statement that Pakistan’s fiscal primary balance had exceeded program targets, inflation was contained, and external buffers were strengthening. The lender also stated that the authorities are committed to providing support to those affected by recent floods, maintaining inflation within the State Bank of Pakistan’s target range, restoring the viability of the energy sector, and advancing structural reforms.
