Federal government subsidies — mainly electricity tariff differentials, with smaller allocations for wheat, fertilizer, and other commodities.
Source: Budget in Brief — Ministry of Finance, Government of Pakistan.
A subsidy is money the government pays to keep the price of something lower than it would otherwise cost. In Pakistan's federal budget, most subsidy money goes toward electricity — covering the gap between what it actually costs to generate and distribute power, and what consumers are charged.
Smaller subsidies also go toward things like wheat and fertilizer, to keep food and farming costs manageable for ordinary people. Without subsidies, electricity bills and food prices would likely be noticeably higher.
But subsidies come at a real cost to the budget — every rupee spent keeping prices low for consumers is a rupee that can't go toward debt servicing, PSDP projects, or other priorities. This is also a frequent topic in Pakistan's talks with the IMF, which generally pushes for fewer, more targeted subsidies rather than broad ones, arguing that blanket subsidies often help wealthier consumers as much as poorer ones.
Power-sector tariff subsidies are the dominant component in most years — a recurring fiscal pressure point in Pakistan's IMF programme discussions.
What's the biggest subsidy category?
Electricity tariff differential subsidies (including K-Electric and inter-DISCO tariff equalization) have been the largest component in most years covered by this dataset.
Why does Pakistan subsidize electricity so heavily?
Partly to keep bills affordable for lower-income households, and partly because of long-standing inefficiencies and losses in the power sector — often called the "circular debt" problem — which raise the true cost of electricity beyond what's billed to consumers.
What is circular debt and how does it relate to subsidies?
Circular debt is the buildup of unpaid bills and losses across the power sector's supply chain. The government often pays subsidies to cover this gap, which is why power-sector subsidies are so large and persistent.
Are subsidies the same as tax breaks?
No — a subsidy is a direct payment to lower a price, while a tax break reduces how much tax someone owes. Both reduce government resources, but they're tracked separately in the budget.
Why does the IMF want fewer subsidies?
The IMF generally argues that broad subsidies are expensive and poorly targeted — wealthier households often consume more electricity or fuel and so capture a larger share of the subsidy than the poorer households it's meant to help.
Do all Pakistanis benefit equally from subsidies?
No — subsidy benefits often depend on consumption. Someone using more electricity or buying more subsidized wheat receives a larger benefit in Rupee terms, even if the subsidy was intended to help lower-income households most.
Could removing subsidies reduce the fiscal deficit?
It would help — subsidies are a real cost in the budget — but removing them also raises prices for consumers, a politically difficult trade-off every government has had to manage.
Are agricultural subsidies different from electricity subsidies?
Yes — agricultural subsidies (like the wheat support price or fertilizer subsidies) aim to support farmers' incomes and food security, while electricity subsidies mainly aim to keep utility bills affordable for consumers.
Every figure on this page is the Budget Estimate (BE) for that fiscal year, transcribed from that year’s own official Budget in Brief (Finance Division, Government of Pakistan). Most recent year:
Budget in Brief, FY2026-27 (Table 1: Budget at a Glance, Table 2/3: Fiscal Deficit & Financing / BE & RE Comparison, Table 11: Function-Wise Expenditure)Related Budget Categories