• Seeks more data before approving proposed time-of-use tariff
• Fund review concludes without immediate announcement of staff-level agreement
• Officials expect $1.2bn tranche after IMF board approval within four to five weeks
ISLAMABAD: The International Monetary Fund (IMF) did not immediately clear a proposed time-of-use electricity tariff for industry aimed at boosting consumption during off-peak hours as its team concluded a fortnight-long review with Pakistani authorities on Wednesday without announcing a staff-level agreement.
Official sources said the talks had concluded successfully and a staff-level agreement was expected to be announced by the IMF shortly.
They said both Fund programmes — the $7 billion Extended Fund Facility and $1.4bn Resilience and Sustainability Facility — were being implemented in “letter and spirit” and they did not foresee any hurdle to IMF executive board approval for the disbursement of about $1.2bn within four to five weeks.
The IMF staff mission, led by Iva Petrova, did not issue its customary end-of-mission statement, pending approval from the Fund’s headquarters.
Sources said the IMF had sought more data and clarifications on the proposed time-of-use (TOU) tariff. Since the proposal was not part of the ongoing programmes, the staff may come up with its formal position from Washington. “The package is pending with the IMF,” an official source said.
The proposal is aimed at addressing a growing “duck curve” in electricity demand caused by an unprecedented shift towards solar and other alternative energy sources, leaving grid capacity underutilised during the day while demand rises sharply after sunset.
Under the proposed package, the government wants to raise fixed charges for industry to recover a larger share of capacity costs while lowering energy charges through three or four different tariff bands during the day.
At present, industry pays about Rs1,250 per kilowatt per month in capacity charges, recovering around 20 per cent of the fixed costs attributable to the sector. However, the industry is required to pay higher variable rate for energy part.
The power division believes the existing structure offers little incentive to industry to increase grid consumption to reduce its overall electricity costs.
It has argued that the reform is also necessary for the financial sustainability of the power system by balancing demand and supply more evenly over 24 hours.
The division has proposed increasing the capacity charge to Rs7,000-8,000 while reducing the energy charge to Rs8-9.50 per unit between midnight and 9am compared to Rs16-18 per unit at present.
For the solar hours between 9am and 4pm, the energy charge has been proposed at Rs5.60-6.30 per unit, before rising to Rs10-11.30 per unit from 4pm to midnight.
According to a regulatory filing earlier this week, the power division believes the structure would encourage industry to use more grid electricity during solar hours and help stabilise the system. It said expensive grid supply under the existing rigid tariff structure was encouraging industries to shift towards solar, wind and other sources.
Official sources said the IMF had made no new demands during the review except for some makeup adjustments to bridge past slippages.
The revenue target remained unchanged, with greater emphasis on meeting the half-yearly target following first-quarter collections that exceeded the target, they said.
The two sides also agreed to expedite groundwork for targeted gas subsidies through the social protection system to help contain gas sector circular debt, while moving towards implementation of BISP-based subsidies for the poorest electricity consumers from January next year following the introduction of a revised base tariff.
Power distribution companies have already filed petitions for base tariff adjustments during the review period to demonstrate preparedness for the transition.
The government also assured the IMF of plans to reduce cross-subsidies borne by industry and curtail gas sector debt, which has risen to around Rs3.6 trillion, including principal payables of about Rs1.8tr and an almost equivalent amount in accrued interest and late payment surcharges.
Gas companies have reported that the introduction of the protected category for domestic consumers, with tariffs of Rs200-350 per mmBtu, widened the pricing gap and contributed to the increase in circular debt.
Only four of the 12 consumer slabs covered the cost of gas supply during winter, while tariffs remained below breakeven levels for around eight months of the year despite substantial fixed charges.
Not to be defined as prior action but the authorities may have to take a few procedural steps between conclusion of ongoing talks with the IMF and the scheduling of its executive board meeting to ensure smooth processing of Pakistan’s case for disbursement of $1.2bn and seek waivers for a couple of unavoidable slippages that had already happened for the end-June 2026 period.
The IMF structural benchmark committed by the government requires major policy reform by the end of January next year to replace the budgeted tariff differential subsidy and cross-subsidy system with a targeted budgeted subsidy framework for low-income consumers via BISP.
The World Bank is assisting the government to link power consumers to national socio-economic registry. The government has given an undertaking to complete the technical linking along with validity checks by the end of November to determine eligibility criteria.
Published in Dawn, October 8th, 2026
