The IMF and the elephant in the energy sector

The International Monetary Fund (IMF) is not wrong to say that Pakistan’s power sector subsidy regime needs reform. Any serious policy practitioner knows that the present tariff structure is fiscally expensive, administratively weak, and vulnerable to misuse. But the IMF is wrong in how it has framed the problem, sequenced the solution, and identified the culprit. Under the Resilience and Sustainability Facility, the government has committed to replacing the budgeted electricity tariff differential subsidy and cross-subsidy system with a targeted subsidy framework for low-income consumers, to be disbursed through the Benazir Income Support Programme (BISP) by the end of January 2027. On paper, this sounds neat. In practice, it risks becoming another exercise where the poor are asked to pay for the sins of the power sector’s political economy. Firstly, the IMF’s core assumption is analytically weak. It argues that better-targeted subsidies will reduce incentives for higher-income consumers to overconsume electricity. But Pakistan’s protected consumer category is not an overconsumption subsidy. It is a volumetric survival threshold. Consumers with fewer than 200 units are not being encouraged to consume more; they are being forced to consume less. A household that watches its meter like a patient watches blood pressure, avoids using fans excessively in June, delays ironing clothes, limits refrigeration, and fears crossing the 200-unit line is not overconsuming electricity. It is under-consuming modern energy in a climate-stressed country. Electricity misuse should be addressed through targeted administrative correction, not blunt subsidy removal. Secondly, there is no publicly available distributional analysis showing who will lose, who will gain, and by how much once tariff-based subsidies are replaced by BISP-linked transfers. Electricity poverty is not identical to income poverty. A household may be poor but excluded from BISP. A tenant may pay the bill while the m