Pakistan and the IMF are working to finalize the MEFP draft, with electricity subsidies, circular debt and DISCO privatization among key issues under discussion.
Pakistan and the International Monetary Fund (IMF) have entered a crucial stage of negotiations for the release of the next loan tranche, with discussions continuing on a draft Memorandum of Financial and Economic Policies (MEFP), according to sources.
One of the key proposals under consideration involves changing the existing electricity subsidy mechanism for consumers using up to 200 units per month. According to sources, the IMF has proposed ending the current cross-subsidy for these consumers and replacing it with direct electricity subsidies for low-income households through the Benazir Income Support Programme (BISP).
The proposal is part of broader discussions aimed at improving the financial sustainability of Pakistan’s energy sector. Sources said the IMF has also raised concerns over the circular debt in the power sector, which stands at around Rs1,675 billion.
Pakistan and the IMF are discussing measures to prevent further accumulation of circular debt and improve the financial position of the energy sector. The talks are focused on reaching consensus on the remaining issues before the MEFP draft can be finalized.
The proposed privatization mechanism for distribution companies, or DISCOs, is another issue under discussion. Sources said the IMF has raised questions about the proposed process, while Pakistani officials are providing explanations and clarifications.
Negotiations on the MEFP draft remain ongoing as both sides work toward an agreement. The IMF mission is expected to leave Pakistan in the coming days.
Sources said that if the two sides fail to reach complete agreement on the draft before the mission’s departure, virtual negotiations could continue for a staff-level agreement (SLA).
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