Shafaqna Pakistan: The federal government of Pakistan has decided to phase out the existing electricity subsidy mechanism for consumers and replace it with a targeted support system.
According to sources in the Ministry of Finance, the new system is expected to be implemented from January 2027, under which electricity subsidies will be distributed through the Benazir Income Support Programme (BISP). Only eligible and low-income consumers will be identified using BISP data.
Officials said Pakistan has also reached an understanding with the International Monetary Fund (IMF) on restructuring the subsidy framework, and has provided written assurances regarding reforms in the power sector’s support system.
New targeted subsidy framework
Under the new system, tariff differential and cross-subsidy arrangements will be discontinued. The reform aims to eliminate misuse of subsidies, including the practice of using multiple electricity meters to keep consumption below threshold limits.
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Authorities will link electricity consumers with the National Socio-Economic Registry (NSER), while the World Bank will assist in developing a verification system for identifying eligible beneficiaries. An external firm is also expected to be hired this month to manage subsidy payments.
Wider reforms in irrigation system
Sources said reforms will also extend to the irrigation sector, where an e-Aabiana system will be introduced nationwide. The system is already operational in Punjab and will now be expanded to Sindh, Khyber Pakhtunkhwa, and Balochistan.
IMF programme update
Officials confirmed that the IMF Executive Board is scheduled to meet tomorrow to approve a $1.2 billion loan tranche for Pakistan.
