ISLAMABAD: Pakistan’s government is expected to allocate Rs1.079 trillion as a subsidy for the power sector in the fiscal year 2025-26, slightly lower than the Rs1.190 trillion earmarked for FY 2024-25, according to well-informed sources in the Finance Division. These figures have been finalized following recent discussions between the government’s economic team and the International Monetary Fund (IMF) Mission.
The Finance Division has also issued revised provisional Indicative Budget Ceilings (IDCs) of Rs636.136 billion for sector subsidies under the recurrent budget for FY 2025-26, an increase from the earlier Rs400 billion.
Due to unavailable details on the revised subsidy allocation for FY 2024-25, it remains unclear whether the entire amount was utilized by the Power Division or if deviations occurred.
The Finance Division has instructed the Power Division and all Principal Accounting Officers (PAOs), heads of departments, and entities to strictly comply with budget preparation protocols, including adherence to the Public Financial Management (PFM) Act 2019, performance-based budgeting, and the adoption of the Single Treasury Account (TSA) under the Cash Management & TSA Rules 2024.
Additional guidelines include incorporation of climate-sensitive and gender-related key performance indicators (KPIs), quarterly budget submissions, adherence to austerity measures, and strict expenditure discipline without expecting supplementary budgets.
Recently, the Finance Division informed the Power Division that subsidy allocations for FY 2025-26 will depend on available fiscal space. The Power Division had requested indicative budget allocations to address circular debt issues in a letter titled “MEFP for EFF 2024-27 – Circular Debt Target for FY 2025-26.”
Budgetary allocations will be finalized through standard procedures in coordination with the Finance Division’s Budget and Corporate Finance Wings, mindful of fiscal constraints.
Notably, the Finance Ministry declined the Power Division’s proposal to release an advance subsidy of Rs224 billion aimed at easing cash flow and liquidity problems in the power sector, stating that adequate funds totaling Rs633 billion had already been allocated across various budget heads.
The Power Division had submitted a draft summary for Economic Coordination Committee (ECC) approval on March 25, 2025, but the Finance Division maintained that sufficient funding was already in place.
