Pakistan to Replace Power Subsidies for IMF Climate Loan

The Government of Pakistan committed to replacing untargeted electricity subsidies with a targeted system routed through the Benazir Income Support Programme to secure a $1.2 billion climate support facility from the International Monetary Fund. The reform aims to prevent the misuse of subsidies, such as consumers using multiple meters to stay below 300 units, and will redirect approximately Rs500 billion toward eligible low-income households. Full implementation is scheduled for January 2027, with the government planning to test the mechanism by August 2026 with assistance from the World Bank Group.

These energy reforms are part of a broader package of conditions for the IMF loan, which the Executive Board reviewed on May 8, 2026. Additional requirements include the nationwide digitalization of irrigation taxes via e-Aabiana and a mandate that climate priority in public investment projects increase to 30%. To further fund green projects, the government plans to issue a $250 million Panda Bond.