ISLAMABAD: Pakistan has finalised plans to replace the existing electricity subsidy structure with a targeted support model linked to the Benazir Income Support Programme (BISP) from January 2027 as part of wider economic reforms agreed with the International Monetary Fund (IMF).
According to sources in the Prime Minister’s Office, the government has assured the IMF that the current power subsidy system, including tariff differential and cross-subsidy mechanisms, will gradually be phased out in favour of a data-driven approach focused on low-income households.
Under the proposed system, electricity subsidies will be linked to verified socio-economic data available through the National Socio-Economic Registry (NSER) and BISP databases. Officials say the model is intended to improve transparency, reduce misuse and ensure subsidies reach eligible consumers.
Authorities believe the current subsidy structure has allowed some consumers to benefit unfairly by using multiple electricity connections to remain below subsidised consumption limits. The revised mechanism is expected to address these gaps by connecting subsidy eligibility directly to household income records.
The government, with technical support from the World Bank, is integrating electricity consumer data with the NSER database. Officials also expect a foreign consultancy firm to be appointed later this month to develop the operational framework for subsidy distribution.
Irrigation and fiscal reforms under way
Alongside energy sector reforms, the government is expanding irrigation sector changes under broader fiscal and sustainability measures.
Punjab’s digital “e-Abiana” irrigation water charges system is expected to be extended nationwide, including Sindh, Khyber Pakhtunkhwa and Balochistan, by August 2027.
Officials are also preparing plans to align irrigation water charges with operational and maintenance costs by February 2027 as part of long-term resource management reforms.
IMF funding and climate-related measures
Sources said Pakistan is close to securing the next tranche of IMF funding under the Resilience and Sustainability Facility (RSF).
An IMF Executive Board meeting scheduled in Washington on May 8, 2026, is expected to review approval of more than $1.2 billion for Pakistan, including $1 billion under the Extended Fund Facility (EFF) and an additional $210 million through the RSF programme.
The reforms are also linked to climate resilience efforts following recent flood-related economic losses. Officials said the government plans to integrate climate priorities into public spending, improve water management systems and encourage environmentally sustainable energy policies.
The State Bank of Pakistan and the Securities and Exchange Commission of Pakistan have already introduced climate-related financial risk guidelines, while a national disaster risk financing framework is expected by August 2026.
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