Pakistan FY26 budget may envisage Rs1.079trn power subsidy
ISLAMABAD: The government is likely to earmark an amount of Rs 1.079 trillion subsidy for the power sector for the fiscal year 2025-26 against Rs 1.190 trillion for FY 2024-25, well informed sources in Finance Division told Business Recorder.
These figures have been finalized in recent meetings between the government's economic team and International Monetary Fund (IMF) Mission.
Finance Division has also conveyed revised provisional Indicative Budget Ceilings (IDCs) of Rs 636.136 billion for sector subsidy on account of recurrent budget for 2025-26. Earlier, this amount was Rs 400 billion.
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Since details of revised amount of subsidy for power sector for FY 2024-25 are not available it is not known if entire allocation has been consumed by the Power Division or there was some deviation.
Finance Division has also asked Power Division to comply with mandatory instructions strictly and fully by all Principal Accounting Officers (PAOs), heads of departments and bodies /entities while preparing budget estimates for each cost centre and head of accounts.
The following instructions have to be followed :(i) PAOs are required to comply with the provisions of the PFM Act, 2019 regarding performance-based budgeting and expenditures by formulating well defined plans; (ii) guidelines and procedures contained in Financial Management and Powers of PAOs Regulations, 2021 and the BCC for FY 2025-26 shall be adhered to ;(iii) ensure adoption of Single Account (TSA) as per Section 30 of the PFM Act, 2019 read with Cash Management & TSA Rules, 2024; (iv) for Climate Sensitive Budgeting / Green Budgeting the information has to be filled for both current and development budget as per the typology defined in Form-IV.
The cost centres related to green component shall also be identified while submitting the BOs/NISs; (v) KPIs related to gender and climate may also be identified separately in Performance-Based Budge-ting (Form-1); (vi) PAOs, Heads of Departments and Bodies / Entities shall submit quarter-wise budget estimates for FY 2025-26; (vii) PAOs shall make expenditures keeping in view the budgetary allocations without any assumption of additional allocation during the financial year.
Supplementary budget, regular and technical, shall not be provided; (viii) austerity measures, as issued by Finance Division from time to time, shall be fully adhered to. No allocations shall be made for banned heads of expenditures. Such allocation, if made, shall be approved by the austerity committee; and (ix) ensure full allocation of rupee cover again leased after approval of for will be adjusted from within the funds provided, anticipated foreign grants subsequently requested.
Recently, Finance Division had conveyed to Power Division that the allocation of power sector subsidies for the fiscal year 2025-26 will depend on the availability of fiscal space.
In a letter titled 'MEFP for EFF 2024-27 – Circular Debt (CD) Target for FY 2025-26,' the Power Division had sought indicative allocations for the upcoming fiscal year to bridge the circular debt gap.
According to the Corporate Finance (CF) Wing of the Finance Division, budgetary allocations for the power sector in FY 2025-26 will be finalized through the standard budgetary process in consultation with the Budget and CF Wings of the Finance Division, keeping in view the prevailing fiscal constraints.
Finance Ministry did not endorse the Power Division's proposal to release an advance subsidy of Rs224 billion to address power sector cash flow and liquidity concerns, arguing that adequate funds have already been provided.
On March 25, 2025, the Power Division shared a draft summary with the Finance Ministry for submission to the Economic Coordination Committee (ECC), requesting the release of the advance subsidy. However, the Finance Division responded that sufficient funds—amounting to Rs633 billion—had already been allocated under various budgetary heads in line with the Power Division's requirements.
Copyright Business Recorder, 2025
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