Pakistan is preparing a broad fiscal reform plan aimed at increasing revenue collection and reducing untargeted subsidies from the next financial year, with the government seeking to improve the tax-to-GDP ratio under commitments made to the International Monetary Fund (IMF).
According to officials with knowledge of the matter, the IMF has asked Pakistan to gradually phase out electricity subsidies for most residential consumers using less than 200 electricity units per month. Under the proposed framework, the current blanket subsidy system would be discontinued from Jan. 1, 2027, with future financial support restricted to deserving households enrolled under the Benazir Income Support Program.
Government officials said Islamabad is finalizing a targeted subsidy mechanism in line with IMF requirements to ensure that only low-income families receive electricity relief. The new model would likely rely on data available through the National Socioeconomic Registry.
The federal government is also planning to gradually withdraw the existing tariff differential subsidy and cross-subsidy structure in the power sector through the upcoming federal budget, sources said. According to relevant officials, the revised subsidy regime is expected to become operational from January 2027 and will focus exclusively on verified low-income consumers.
Authorities are also reviewing cases where multiple electricity meters are installed at a single residence. Officials believe some consumers use more than one meter to artificially maintain consumption below the 200-unit threshold in order to qualify for lower electricity tariffs.
With technical support from the World Bank, the government plans to connect electricity consumer records with the National Socioeconomic Registry to verify subsidy eligibility. Officials said a formal verification exercise would begin once the integration process is completed. The government is also expected to appoint an external consultancy firm by the end of the current month to develop a payment and disbursement mechanism for the targeted subsidy program.