The EFF’s Energy Conditions: Prices, Costs, and Private Participation

Late September 2024 brought formalisation of Pakistan’s Extended Fund Facility pathway after months of staff-level negotiation. Energy is not a side letter in that programme. It is a macro-fiscal pillar. Circular debt, tariff notification, gas pricing, captive power, DISCO governance, and capacity-cost reduction appear repeatedly because they decide whether fiscal consolidation survives contact with the power bill. Contemporaneous summaries of the staff report placed power circular debt near Rs 2,794 billion by end-March 2024 and stressed that tariff adjustments since 2021, plus sizeable subsidies, had helped stabilise nominal flow without solving structural cost.

The EFF logic follows: keep tariffs aligned with costs through timely rebasing and quarterly adjustments; use a budgeted subsidy envelope, reported around Rs 1,229 billion for FY25, as a bridge; and execute cost-side measures so the bridge is not permanent. Private participation in DISCOs sits among the structural benchmarks because public management has not closed losses. Whether the instrument is concession or share sale, the Fund’s interest is performance, not ideology. If generation costs remain dominated by fixed obligations, tariff policy alone redistributes pain.