Pakistan’s proposed power prices to lift inflation, help industry, analysts say

Pakistan’s new power price proposals will increase inflation and shift the International Monetary Fund-mandated (IMF) subsidy cuts onto middle-class households while easing pain for industries, analysts say. The plan, ending a system where businesses subsidised household energy bills, could trigger a 1.1 percentage point jump in inflation over 12 months, Optimus Capital Management said. Analysts say the plan, which only needs formal approval to come into effect, will cause industrial prices to fall between 13% and 15% and remove 102 billion ($365 million) rupees in subsidies. That means middle-class households will have to pay roughly 50% more for power, the analysts estimated. Inflation backdrop Pakistan endured one of Asia’s highest inflation spikes in 2023, nearing 40%, driven by a weakening rupee, rising fuel costs and price hikes linked to IMF-backed reforms. Although inflation has since slowed to 5.8%, analysts warn the changes to power prices could add inflationary pressure.