ISLAMABAD: Pakistan is reported to have pledged to the International Monetary Fund (IMF) to phase out untargeted electricity subsidies and channel future support through the Benazir Income Support Programme (BISP) has sparked debate over its impact on ordinary citizens.
Under the agreement tied to a $1.2 billion climate support loan, Islamabad will withdraw blanket tariff differential subsidies — worth nearly Rs. 500 billion — by January. The move is expected to ease fiscal pressure and align energy reforms with national climate commitments.
Officials argue the new mechanism will ensure that only the poorest households benefit, curbing misuse by higher-income consumers who split usage across multiple meters to avoid higher tariffs.
Finance Minister Muhammad Aurangzeb confirmed that the IMF executive board is set to approve $200 million under the Resilience and Sustainability Facility this week.
Yet, analysts warn the reform could hit lower- and middle-income families who fall outside BISP’s safety net. Farmers relying on subsidised tube wells, as well as residents of tribal areas and Azad Jammu & Kashmir, are also likely to face steeper bills.
Speaking at the “Breathe Pakistan International Climate Change Conference,” Aurangzeb stressed the need to leverage existing financing streams, including IMF, World Bank and Asian Development Bank loans. He reiterated plans to float $250 million Panda bonds this month to fund environment-friendly and health projects.
While the IMF views targeted subsidies as a step toward reducing overconsumption and aligning tariffs with actual costs, the policy shift underscores a delicate balance: fiscal consolidation and climate alignment on one side, and mounting household pressures on the other.
