BISP budget to rise 20pc to Rs716bn in FY26; Kafalat stipend increased
This was revealed in the report uploaded on the International Monetary Fund (IMF) website on the first staff level agreement.
Pakistani authorities will implement an electricity subsidy reform that will replace the existing budgeted tariff differential subsidy and cross-subsidy system with a targeted budgeted subsidy framework for low-income consumers, to be facilitated via BISP, and a simplified tariff structure, in the context of FY2026-27 budget and 2026-27 annual rebasing, with initial rebates to begin by end-January 2027.
Pakistani authorities pledged the following: 'Ahead of this implementation, we will work closely with the IMF and World Bank to identify and verify consumers to be targeted under the new subsidy framework by end-January 2026; define eligibility criteria by end-July 2026; have a rebate mechanism in place with financial institutions by end-July 2026; and begin to roll out our communications campaign around this by end-June 2025.
We will also seek to reform our gas subsidy system, which also entails a distortive and broadly targeted cross-subsidy system that spur over consumption and wastage, to target low-income consumers. We will undertake analysis to better assess the viability of a scheme similar to that to be implemented in the power sector and will decide on a path forward by end-June 2026.'
The World Bank is engaging with the Power Ministry and BISP to develop (1) a method to identify electricity consumers by income rather than consumption level and (2) a transfer mechanism that could replace the current energy subsidy frameworks, the IMF says in its report.
The federal government has informed the IMF that it is working closely with the World Bank to refine BISP administrative systems: 'We commit to keeping the NSER (National Socio Economic Registry) live and covering all of Pakistan's poor; keeping BISP enrolment open; and administering the regular re-declaration of BISP beneficiaries' status on the intended three-year cycle.' The government has also committed to IMF to rebuilding non-BISP health and education spending at the federal and provincial level while acknowledging the decline in non-BISP federal and provincial spending on health and education programmes in recent years and commit to gradually rebuilding this as a share of GDP over the course of our programme.
'We missed health and education targets in FY25H1, largely due to execution constraints in Sindh and KP, but will endeavour to fully executing the budgeted Rs 2,882 billion (2.4 percent of GDP) by end-FY25. The FY26 budget will include a similar level of health and education spending as a share of GDP (Gross Domestic Product), equivalent to Rs 3,156 billion,' Pakistani officials pledged.
From July to February FY2024-25, Rs 347 billion were disbursed under BISP, representing an 82.6 percent increase over the previous year, against a full-year allocation of Rs 592.5 billion, the IMF report further stated.
Copyright Business Recorder, 2025
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