Pakistan, IMF discuss DISCOs privatisation and power sector reforms

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) are continuing discussions on the privatisation of electricity distribution companies and the government’s power sector reform plan during talks on the fourth economic review of the IMF programme.

According to sources, the government has shared a timeline for the privatisation of distribution companies (DISCOs) with the IMF. Under the first phase, privatisation of Faisalabad Electric Supply Company (FESCO), Gujranwala Electric Power Company (GEPCO) and Islamabad Electric Supply Company (IESCO) is targeted for completion by March 2027.

FESCO’s privatisation is expected to be completed in January, followed by GEPCO in February and IESCO in March 2027.

The second phase includes Hyderabad Electric Supply Company (HESCO) and Sukkur Electric Power Company (SEPCO), with their privatisation targeted between April and June 2027.

Peshawar, Hazara, Lahore and Multan electricity distribution companies have been given a target of December 2027 for completion of the privatisation process. Quetta Electric Supply Company (QESCO) is not included in the current plan.

The issue of power sector circular debt is also being discussed with the IMF. The circular debt stood at Rs1.675 trillion at the end of June 2026, a level that has raised concerns during the negotiations.

The government has allocated Rs830 billion in subsidies for the power sector for the fiscal year 2026-27. Discussions are also underway on changes to the existing cross-subsidy mechanism for consumers using up to 200 units of electricity and the introduction of a more targeted subsidy mechanism.

IMF programme documents also identify greater private sector participation in DISCOs and improvements in the performance of the power sector as part of the reform agenda. According to the documents, progress on the first phase involving FESCO, GEPCO and IESCO has been targeted for early 2027 following delays in the privatisation process.

Sources said the government is also working on a proposal to separate old liabilities of DISCOs and transfer them to a special purpose vehicle (SPV).

In case the two sides fail to reach consensus during the current round of talks, discussions may continue virtually. The IMF review mission is also expected to leave Pakistan in the coming days.