What Are the Biggest Subsidies in Pakistan's 2026-27 Budget?
Where the Rs 1,091 billion subsidy bill goes, led by the power sector
By the ISN Media desk • June 2026 • Approx. 4-min read
This is a short, factual answer about Pakistan's largest subsidies in the 2026-27 budget. The figures are Budget Estimates from the Government of Pakistan, in billions of rupees. For the full explainer, see subsidies, who gets the 1,091 billion.
What are the biggest subsidies in Pakistan's 2026-27 budget?
Pakistan's total subsidy bill is about Rs 1,091 billion in 2026-27, or 5.8 percent of the budget, down about 8 percent on the year, and the largest share has historically gone to the power sector. Power subsidies hold down the electricity tariffs households and businesses pay, and help manage the gap between the cost of supplying electricity and what consumers are charged, a gap linked to the accumulation of circular debt. Other subsidies support areas such as fuel, food staples and certain industries at various times.
Why the power sector dominates
The power sector dominates the subsidy bill because the cost of supplying electricity in Pakistan has consistently exceeded what consumers are charged, and the government covers part of that gap to keep tariffs from rising further. This is connected to the wider problem of circular debt, the unpaid bills that pile up inside the power system, explained in national debt vs circular debt. Because these subsidies sit on top of electricity bills, they are politically difficult to cut.
Who benefits
Unlike targeted cash support such as BISP, much of the subsidy bill is untargeted, flowing through prices, so it reaches every consumer of the subsidised good, including the well-off, who often consume more. This is the central criticism of broad subsidies, and the reason the International Monetary Fund presses for them to be reduced in favour of targeted cash. The shift visible in this budget, subsidies down while cash support rises, reflects that approach.
Frequently asked questions
What are the biggest subsidies in Pakistan's budget? The subsidy bill is about Rs 1,091 billion in 2026-27, led by the power sector, which holds down electricity tariffs and manages the cost gap linked to circular debt. Other subsidies cover fuel, food and certain industries.
How much does Pakistan spend on subsidies? About Rs 1,091 billion, or 5.8 percent of the budget, down about 8 percent on the year.
Who benefits from subsidies? Much of the bill is untargeted, flowing through prices, so it reaches everyone who buys the subsidised good, including the well-off who often consume more. This is the main criticism of broad subsidies.
Why are power subsidies hard to cut? Because they sit on top of electricity bills that households and businesses already find punishing. Reducing them raises those bills directly, which makes the cuts politically and economically difficult.
Why is the subsidy bill falling? It was cut about 8 percent as the government trimmed discretionary spending to contain the deficit, and in line with IMF pressure to move from broad subsidies toward targeted cash.
How are subsidies linked to circular debt? Power subsidies help cover the gap between the cost of supplying electricity and what consumers are charged, a gap connected to the accumulation of unpaid bills, or circular debt, inside the power system.
How do subsidies differ from cash support like BISP? A subsidy lowers the price of a good for everyone who buys it, so it is untargeted; cash support gives money directly to a chosen poor family identified through a means test. Targeted cash reaches the poor more precisely than a broad price subsidy.
Why does the IMF want subsidies reduced? Because untargeted subsidies reach everyone, including the well-off, while targeted cash reaches the poor for less money. The IMF therefore favours shifting from broad subsidies toward targeted transfers, a change visible in this budget.
Sources and notes
- Government of Pakistan, Federal Budget 2026-27: subsidy figures are Budget Estimates in billions of rupees, rounded for readability.
- The link between power subsidies and circular debt, and the IMF's position, reflect public records.
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