The International Monetary Fund (IMF) has said Pakistan’s power sector arrears remain within agreed program targets, signaling progress under the country’s $7 billion Extended Fund Facility (EFF).

However, the Fund stressed that proposed electricity tariff changes must protect middle- and lower-income households.

The IMF stated that Pakistan’s power sector arrears are currently contained within the objectives set under the ongoing program. Efforts to improve recoveries and curb losses in the electricity sector have shown positive results.

According to the Fund, measures aimed at strengthening financial discipline and reducing inefficiencies are yielding progress.

The IMF noted that broader power sector reforms are moving forward under the Extended Fund Facility (EFF) program worth $7 billion.

These reforms include privatization of distribution companies, privatization of generating companies, and restructuring of the transmission system. The goal is to enhance efficiency, reduce circular debt, and stabilize the country’s energy sector.

The reform agenda is part of Pakistan’s wider effort to stabilize its macroeconomic environment and ensure long-term sustainability in public finances.

The IMF confirmed that staff-level discussions are ongoing regarding proposed electricity tariff revisions. These talks will continue at the end-March review of the EFF program.

The Fund said it is assessing whether Pakistan’s proposed tariff changes are consistent with the objectives of the EFF and whether they could impact macroeconomic stability and inflation.

Warning against disproportionate burden

While recognizing the need for reforms, the IMF emphasized that any proposed increase in electricity tariffs should avoid placing a disproportionate burden on middle- and lower-income households.

The Fund underscored that social protection considerations must remain central as Pakistan moves forward with energy sector adjustments.

The reforms are designed not only to address structural issues in the power sector but also to strengthen Pakistan’s broader economy.

By improving recoveries, reducing losses, and restructuring key energy institutions, authorities aim to stabilize the economy and create a more sustainable electricity system.

The IMF reiterated that continued dialogue will determine how tariff revisions align with program goals, inflation control, and overall macroeconomic stability.