Pakistan secures IMF approval to reduce electricity rates amid energy sector reforms

Pakistan has successfully persuaded the International Monetary Fund (IMF) to reduce electricity rates by PKR 2 per unit, according to sources. The breakthrough came after a lengthy session with the IMF, resulting in a reduction of the base electricity tariff by PKR 1.5 to 2. A final decision on the reduction is expected next month.

The IMF has given its principled approval to reduce the base electricity tariff, contingent upon Pakistan providing a comprehensive plan for the privatization of Distribution Companies (DISCOS).

The IMF has expressed dissatisfaction with the performance of DISCOS and raised concerns over their financial losses. According to the IMF, the poor performance of DISCOS is the biggest obstacle to reforms in the energy sector.

In response, the Pakistani government has presented a plan for the privatization of three DISCOS in the first phase: Islamabad Electric Supply Company (IESCO), Faisalabad Electric Supply Company (FESCO), and Gujranwala Electric Power Company (GEPCO).

The second phase will include the privatization of Multan Electric Power Company (MEPCO), Lahore Electric Supply Company (LESCO), and Hyderabad Electric Supply Company (HESCO).

The Power Division reported that DISCOS faced PKR 591 billion in losses due to line losses and low recovery during the fiscal year 2023-24, with losses amounting to PKR 239 billion in the first quarter of FY2024-25. The IMF has emphasized that reforms in the energy sector are not possible without the privatization of DISCOS.