IMF Rejects GST Cut. Pak Govt Plans New Power Bill Surcharge

Pakistan has informed the International Monetary Fund (IMF) that it will not introduce new taxes and will instead focus on legal and administrative reforms to cover the expected revenue gap. However, according to Dawn, the government's stance on electricity pricing appears contradictory, as it seeks a GST waiver while also proposing a fresh financial surcharge on electricity bills.

With technical discussions now completed, the formal policy-level talks will commence on March 10, during which the IMF will officially respond to Pakistan’s proposals. Sources reveal that the IMF has already dismissed Pakistan’s plea to reduce or eliminate GST on electricity, arguing that such a move would harm revenue generation.

However, the global lender has endorsed the government’s plan to levy an extra Rs2.83 per unit surcharge on electricity bills for the next five years to repay Rs1.2 trillion in loans intended to partially clear circular debt.

This new surcharge will be added to the existing Rs1.47 per unit financing cost, further increasing consumer bills due to previous borrowings. Despite government promises of lowering power tariffs, this measure transfers the financial burden of inefficiencies in the power sector directly to electricity consumers.

Additionally, the IMF has turned down Pakistan’s request to extend the winter tariff package, which provides discounted electricity rates for increased industrial and commercial usage.

Meanwhile, officials updated the IMF on their plan to cut solar net-metering tariffs from Rs26 per unit to Rs10, a move that may discourage consumers from adopting solar energy. Authorities assured the IMF that they will monitor the impact and make necessary adjustments if required.