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ISLAMABAD: IMF talks with Pakistan have focused on power-sector arrears, uniform electricity tariffs and the financial impact of planned reforms.
According to sources cited by The Express Tribune, the federal government has agreed on a mechanism to recover more than Rs110 billion in provincial electricity dues.
The proposed mechanism would deduct the amount from provincial shares under the National Finance Commission (NFC) award.
Sources said the IMF questioned the fiscal impact of recovering the arrears from provincial shares.
The government told the lender that more than Rs110 billion in dues had been reconciled. It also plans to recover nearly Rs50 billion soon.
Provincial governments have previously opposed attempts to adjust such dues against their NFC shares.
The Power Division did not confirm whether the provinces had provided written consent for the proposed deductions.
The division said the Finance Division was responsible for the federal adjustment mechanism.
The Power Division briefed the IMF on developments in the electricity sector, including circular debt.
Sources said the debt stock increased by Rs61 billion during the last fiscal year. It reached Rs1.675 trillion.
The Power Division attributed the increase to lower-than-budgeted subsidies and a payment dispute with K-Electric.
The IMF has previously set targets for reducing power-sector arrears and improving the sector’s financial sustainability. Its latest programme documents include a lower FY27 circular debt-flow target and reforms aimed at achieving cost recovery.
Sources said the IMF was concerned that deductions from provincial shares could put further pressure on provincial finances.
The provinces are required to generate a cash surplus of Rs1.7 trillion and provide Rs1.036 trillion in cash grants, according to the report.
The federal government had also attempted to deduct more than Rs6 billion a month from Khyber-Pakhtunkhwa’s share.
The proposed deduction related to a reverse cash grant under the National Economic Initiative. The provincial government did not provide the required debit authority, so the deduction could not proceed.
The Power Division told the IMF that it was installing smart meters to help resolve billing disputes involving provincial governments.
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The IMF also asked about the future of Pakistan’s uniform electricity tariff after the privatisation of power distribution companies.
Sources said Pakistani officials did not provide a clear response on whether the policy would end.
Under the uniform tariff system, consumers connected to different distribution companies can face the same notified consumer-end tariff despite differences in the companies’ costs and efficiency.
NEPRA’s 2026 tariff decision provides for a revised uniform tariff structure for distribution companies and K-Electric under federal policy guidelines.
The IMF discussions also covered the financial dispute between K-Electric and the federal government.
Sources said K-Electric has delayed payments for electricity purchased from the federal system because of disagreements over tariffs and subsidy claims.
The federal government is willing to clear more than Rs100 billion in K-Electric claims, subject to a settlement of tariff-related issues, according to the sources.
The IMF’s programme documents also identify the K-Electric dispute as an issue contributing to power-sector arrears. The authorities had committed to resolving the dispute by the end of September 2026.
The IMF also questioned the delay in reviewing the industrial incremental support package, according to sources.
A hearing has been scheduled for October 5.
The package introduced a special tariff of Rs22.96 per unit for eligible industrial consumers. It was due for review six months after its introduction in December 2025.
Sources said the review could result in higher incremental tariff rates.
The IMF programme requires periodic reviews of the incremental pricing scheme and provides for adjustments if additional costs arise.
Pakistan’s IMF programme includes measures to reduce circular debt and improve the financial viability of the electricity sector.
The IMF has called for timely tariff adjustments, targeted subsidies and reforms to improve distribution efficiency.
The programme also includes efforts to resolve arrears involving power-sector entities and move towards a more competitive electricity market.
[…] IMF: Pakistan plans to recover Rs110bn power dues from provincial shares […]