IMF Rejects Pakistan's Plan for Subsidized Bitcoin Mining

Pakistan's plan to utilize surplus electricity for Bitcoin mining has encountered a significant hurdle. The International Monetary Fund (IMF) has rejected the government's proposal to offer subsidized power rates to energy-intensive industries, including cryptocurrency miners. The Power Division had proposed a marginal-cost tariff of 22-23 Pakistani rupees per kilowatt-hour for industries such as copper smelting, data centers, and crypto mining. The government intended to allocate 2,000 megawatts from its 7,000 MW electricity surplus to crypto mining at rates equivalent to $0.08 per kWh. However, the IMF dismissed this plan, citing historical economic imbalances caused by sector-specific tax breaks in Pakistan.

The rejection poses a substantial challenge to Pakistan's broader digital transformation initiative. The government had planned to allocate the 2,000 megawatts in May 2025 to attract foreign investment and create high-tech employment opportunities. Finance Minister Muhammad Aurangzeb had previously announced tax incentives for AI centers and duty exemptions for Bitcoin miners to support this initiative. Pakistan generates significant surplus electricity, particularly during winter months when demand drops to 12,000 MW. The country pays 2.1 trillion Pakistani rupees annually in capacity payments to idle power plants. Officials argued that channeling this excess capacity toward Bitcoin mining could generate approximately $500 million yearly while addressing the financial burden of unused electrical infrastructure.

The IMF expressed concerns that subsidized electricity rates could distort energy markets and exacerbate existing issues in Pakistan's fragile power sector. Pakistan requires IMF approval for all significant energy policies under its current bailout agreement. Officials confirmed that discussions with international institutions continue as the government works to refine the proposal according to global standards.

The IMF's position reflects broader international concerns about cryptocurrency mining's environmental impact and resource allocation. Other developing nations have pursued similar strategies with mixed results. Pakistan's crypto strategy includes plans for a national Bitcoin reserve and the establishment of the Pakistan Digital Asset Authority to regulate exchanges and wallets. The IMF's stance aligns with its broader cryptocurrency policy framework, which suggests that crypto mining could generate 0.7% of global carbon dioxide emissions by 2027. Traditional financial institutions remain cautious about energy subsidies for mining operations, particularly in countries with existing power sector challenges.

Pakistan's experience serves as a test case for other emerging economies considering similar approaches. The outcome of ongoing negotiations between Pakistani officials and international financial institutions may influence how other nations structure their cryptocurrency mining policies. The government maintains that the proposal remains under review rather than permanently shelved, suggesting potential modifications to address IMF concerns while preserving the initiative's core objectives.