Pakistan is urged by the IMF to reduce energy subsidies and do away with circular debt.

Pakistan has been requested by the International Monetary Fund (IMF) to cap energy sector subsidies at Rs830 billion in the next budget.

Additionally, the IMF recommended a gradual reduction in annual subsidies and encouraged the government to eradicate circular debt in the power sector by fiscal year 2031.

Pakistan has promised the IMF that reforms and improvement measures will be implemented more quickly and has set a goal of zero cyclical debt creation in the electrical industry for the fiscal year 2026–2027.

The reform package includes steps to eradicate circular debt, privatisation of the power industry, gradual hikes in gas and electricity prices, and cutbacks in subsidies.

By early 2027, it is anticipated that electricity distribution businesses will either be privatised or put under private administration.

Although these steps are intended to stabilise the energy industry, officials cautioned that rising gas and electricity costs could make living more expensive for customers.