Pakistan’s revenue performance and plans to shift electricity subsidies towards targeted support through the Benazir Income Support Programme (BISP) were among the key issues discussed during ongoing talks with the International Monetary Fund (IMF). An IMF mission led by Iva Petrova concluded discussions with Federal Board of Revenue (FBR) authorities on Wednesday, with informed sources saying Pakistan had exceeded its first-quarter revenue target despite pressures from the external economic environment. The discussions form part of the review process ahead of the IMF Executive Board’s consideration of a $1.2 billion disbursement and related waivers concerning slippages recorded at the end of June 2026.
Another part of the discussions focused on BISP and the government’s commitment to increase cash transfers by about 25%. The talks also reviewed plans to move electricity subsidies away from the existing consumer tariff mechanism and towards targeted disbursements through BISP scorecards by January 2027. The proposed change is linked to an IMF structural benchmark requiring Pakistan to replace the existing cross-subsidy arrangement with a targeted framework for low-income electricity consumers. The IMF programme documents also identify the planned subsidy reform as a measure to replace the budgeted tariff differential and cross-subsidy system with targeted support through BISP.
The government is working with the World Bank to connect electricity consumers with the National Socio-Economic Registry, with validity checks expected to help establish eligibility criteria by late November. The reform is intended to create a mechanism through which electricity support can be directed towards eligible lower-income households instead of being provided through the broader tariff structure. Further clarification from the Power Division regarding the elimination of the existing electricity tariff subsidy was expected as discussions continued. The IMF’s programme framework places the deadline for this subsidy reform at the end of January 2027.
Fuel subsidies were also part of the broader social protection discussion. According to the report, the IMF is seeking to have the Prime Minister’s fuel subsidy operated through BISP. The government has committed to protecting vulnerable households from volatility in food and fuel prices by increasing the coverage and capacity of BISP’s unconditional cash transfer programme to Rs18,000. The IMF’s programme documents separately provide for inflation adjustments to targeted cash transfers so that support for vulnerable households maintains its purchasing power.
The economic discussions are taking place against a backdrop of elevated inflation and higher global energy prices. Sources cited in the report indicated that the State Bank of Pakistan could consider monetary tightening to contain second-round effects from higher energy prices linked to the US-Iran conflict. Consumer price inflation had exceeded 11% in August, while September inflation was expected at between 10% and 11% at the time of the report. The State Bank had kept its policy rate unchanged at 11.5% earlier in September. The Ministry of Finance also identified higher global oil prices and their impact on purchasing power, production costs and the import bill as a major risk to the economic outlook.
Despite these pressures, the Ministry of Finance reported improvements in several areas of economic activity during the first two months of fiscal year 2026-27. Manufacturing activity strengthened, supported by higher vehicle production and increased domestic cement dispatches, while early indicators from the agriculture sector were also positive. The ministry said these developments suggested that the recovery was becoming broader across production, trade, transport and related services. The IMF’s existing programme framework also calls for continued fiscal discipline, including limits on power subsidies and measures to strengthen revenue collection.
The external sector also recorded progress, with stronger workers’ remittances and continued growth in information technology exports helping narrow the current account deficit. Fiscal performance remained supportive as tax collection stayed broadly aligned with targets and recent data indicated a primary surplus. Together, these developments form part of Pakistan’s ongoing efforts to maintain fiscal and external stability while supporting economic activity. The latest IMF discussions therefore cover revenue performance alongside changes to social protection, electricity subsidies, energy costs and broader fiscal management as Pakistan works through the next stage of its IMF-supported economic programme.
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