IMF blocks electricity tariff reduction in Pakistan | Government relief package Stalled

A significant reduction in electricity tariffs, promised by the Pakistani government, has been blocked by the International Monetary Fund (IMF), delaying a much-anticipated relief package for consumers. The IMF’s intervention has also held back a staff-level agreement (SLA) on the first biannual review of Pakistan’s $7 billion Extended Fund Facility (EFF).

Reports had suggested that the prime minister would announce an Rs8 per unit reduction in electricity rates during his March 23 speech to the nation. However, no such relief package was announced. Instead, the prime minister chaired a high-level meeting to address last-minute hurdles in the power sector. The meeting, attended by key ministers and officials, reviewed challenges in implementing the proposed tariff cut.

On March 15, the Prime Minister’s Office (PMO) had announced plans to maintain petroleum prices at existing levels, despite a recommended Rs13 per litre reduction by the oil regulator. The financial impact of this decision was intended to be transferred to electricity consumers as part of a broader relief package. The PMO had stated that a “comprehensive and effective strategy” was being prepared to reduce power tariffs, leveraging changes in international oil prices and other measures.

However, the proposed tariff reduction package required IMF approval, as the global lender is currently reviewing Pakistan’s economic performance for the first half of the fiscal year and its outlook through June 2025. According to an official, the proposed numbers “did not work out in the apolitical software of the IMF,” leading to the delay.

This development highlights the challenges faced by the government in balancing domestic relief measures with IMF-mandated fiscal discipline. The stalled tariff reduction has left consumers waiting for the promised relief, while the government works to address the IMF’s concerns.