The Pakistani government is preparing a plan to improve revenue collection and reduce subsidies from the next fiscal year, aiming to boost the tax-to-GDP ratio under the International Monetary Fund framework.
The IMF has asked Pakistan to phase out electricity subsidies for most residential consumers using fewer than 200 units of power per month beginning in the next fiscal year, according to officials familiar with the negotiations.
Under the IMF proposal, broad-based electricity subsidies would end on Jan. 1, 2027, and financial assistance would instead be limited to beneficiaries of the Benazir Income Support Programme, the sources said.
The government has started preparing a new framework to comply with IMF conditions requiring subsidies to be directed only toward eligible low-income households. The new mechanism is expected to be based on the country’s National Socio-Economic Registry.
Officials said the federal government has also decided to gradually eliminate the existing tariff differential subsidy and cross-subsidy system in the power sector in the upcoming federal budget.
Under IMF targets, a new targeted subsidy regime is expected to take effect in January 2027. The revised system would provide relief only to verified low-income consumers.
Sources said consumers using multiple electricity meters at a single residence could lose eligibility for subsidized rates. Authorities believe some households currently use more than one meter to keep monthly consumption below the 200-unit threshold required for lower tariffs.
With support from the World Bank, the government plans to link electricity consumers with the National Socio-Economic Registry to verify eligibility for future subsidies.
Officials said a verification process for eligible beneficiaries will follow once consumer data is integrated into the registry. The government is also expected to hire an external firm by the end of this month to design a mechanism for subsidy payments, according to sources.
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