IMF Rejects Pakistan's Crypto Mining Electricity Subsidy Plan

The International Monetary Fund (IMF) has rejected Pakistan's proposal to offer subsidized electricity for crypto mining operations. This decision comes as a setback to Pakistan's ambitions to become a regional crypto hub, just two months after the country announced a strategic Bitcoin reserve. The IMF's refusal is based on concerns over potential market distortions in Pakistan's already strained power sector, which is burdened with circular debt exceeding $4.5 billion.

During a Senate Standing Committee on Power hearing, Secretary Power Dr. Fakhray Alam Irfan revealed that the IMF has not supported targeted electricity packages for sectors like crypto mining, despite the availability of surplus power during winter months. The plan remains under review by the World Bank and other development partners. The IMF's stance is that subsidized tariffs could create market imbalances in a sector already struggling with significant financial challenges.

This rejection follows a series of negotiations between Islamabad and the IMF regarding plans to increase industrial consumption of surplus electricity. In September 2024, the Power Division proposed a six-month marginal cost package for heavy industries, including crypto mining. However, the IMF only approved a three-month version, citing fears of market distortions. A revised November plan targeting crypto miners and data centers met a similar fate.

The Power Division had proposed a targeted marginal cost-based package offering electricity at $0.08-0.081 per kilowatt-hour for crypto mining and other energy-intensive industries. The government argued that this would boost the consumption of surplus electricity and reduce capacity charges. However, the IMF rejected the proposal, stating that it resembled "sector-specific tax holidays that have historically created imbalances."

The IMF's decision highlights a fundamental tension: while crypto mining can bring economic gains, it must not destabilize already stressed infrastructure. Mohit Agadi, founder of Fact Protocol and formerly of the now-defunct Bitcoin mining firm Cryptobond, emphasized the need for sustainability and economic equity in crypto adoption. He noted that countries looking to benefit from Web3 must first ensure that foundational systems like energy are resilient and inclusive.

Last month, the IMF expressed concerns over Pakistan's plans to allocate 2,000 megawatts of electricity to Bitcoin mining and AI data centers. The government's failure to consult the IMF on this move triggered concerns over energy shortages and fiscal risks. Pranav Agarwal, an independent director at Jetking Infotrain India, suggested a more measured approach that prioritizes sustainability and gradual implementation. He recommended that Pakistan start with lower power consumption and explore tapping into hydel power potential or solar farms to host Bitcoin miners, gradually demonstrating the value to the IMF and other stakeholders.

Pakistan's recent embrace of crypto includes establishing the Pakistan Crypto Council, appointing former Binance CEO Changpeng Zhao as a strategic advisor, and creating the Pakistan Digital Assets Authority in March. This was followed by the appointment of Bilal Bin Saqib as special assistant to the prime minister on blockchain and cryptocurrency. Saqib, who also advises the Trump-linked crypto project World Liberty Financial, announced at the Bitcoin 2025 conference in Las Vegas the creation of Pakistan's strategic Bitcoin reserve, vowing that the country would "never, ever sell" its holdings.