Pakistan's Power Plan: Middle Class Bears Brunt

Pakistan's new energy pricing framework is poised to shift the burden of International Monetary Fund-mandated subsidy cuts from industries to middle-class households. This strategic adjustment is anticipated to contribute to a 1.1 percentage point rise in inflation over a 12-month period, according to financial analysts. The plan aims to remove approximately 102 billion Pakistani rupees in subsidies, with projections indicating a significant increase in power costs for average consumers.

Under the proposed changes, industrial power prices are expected to decrease by 13% to 15%, while middle-class households could see their electricity bills increase by as much as 50%. This move comes amidst Pakistan's ongoing efforts to manage its economy, including previous battles with high inflation rates nearing 40% in 2023. While current inflation has moderated, these power price adjustments introduce new inflationary pressures.

The regulatory authority has also revised rates for rooftop solar users exporting electricity to the grid, a move that has prompted a review ordered by Prime Minister Shehbaz Sharif. The government aims to prevent the additional costs from being transferred to the 37.6 million grid consumers, signaling a delicate balance between supporting renewable energy and ensuring grid stability.