IMF Rejects Pakistan's Bitcoin Mining Subsidy Plan

The International Monetary Fund (IMF) has rejected Pakistan's proposal to offer subsidized electricity to Bitcoin mining operations, citing concerns over potential market distortions and economic imbalances. This decision poses a significant setback to Pakistan's ambitions to become a regional crypto mining hub, just two months after announcing the creation of a strategic Bitcoin reserve.

Pakistan's Secretary of Power, Fakhre Alam Irfan, informed the Senate committee on energy that the IMF had expressed reservations about the plan. The Power Division had proposed a marginal-cost tariff of 22–23 Pakistani rupees (approximately $0.08) per kilowatt-hour for industries such as copper smelting, data centers, and crypto mining. The government argued that this scheme would boost electricity demand and help absorb surplus capacity, particularly during the winter months.

The IMF's rejection is based on historical evidence that sector-specific tax breaks and subsidies have created economic imbalances in Pakistan. The IMF warned that subsidized power packages, especially those targeting specific industries, risk undermining an already fragile electricity sector saddled with over $4.5 billion in circular debt. Despite this setback, the proposal has not been entirely shelved and is currently under review by the World Bank and other international partners. The government is working on refining the plan with input from these institutions.

In May, Pakistan had earmarked 2,000 megawatts of surplus electricity for Bitcoin mining and AI centers as part of a digital transformation initiative. The initiative was led by the Pakistan Crypto Council and supported by the Ministry of Finance. At the time, Finance Minister Muhammad Aurangzeb announced tax incentives for AI centers and duty exemptions for Bitcoin miners to attract investors. The proposal to use the country’s runoff energy to fuel Bitcoin mining was first suggested by Saqib during the Crypto Council’s inaugural meeting in March.

Saqib, who proposed the use of surplus energy for Bitcoin mining, also announced plans for a national Bitcoin reserve during the Bitcoin 2025 conference. He revealed that discussions with Strategy’s Michael Saylor had reinforced his conviction in this move. Saqib further stated that the country intends to expand its Bitcoin holdings using yield generated through decentralized finance protocols.

The IMF's decision underscores the challenges faced by countries looking to leverage their surplus energy for crypto mining. While Pakistan's plan aimed to boost electricity demand and absorb surplus capacity, the IMF's concerns highlight the potential risks to market stability and economic balance. The government's continued efforts to refine the proposal with input from international partners indicate a commitment to finding a viable solution that addresses these concerns.

Some industry figures believe Pakistan’s crypto energy strategy needs a slower rollout. Pranav Agarwal, director at Jetking Infotrain India, said: "Start small. Use existing hydropower or solar potential, demonstrate value over time, and build IMF support gradually." Critics warn that launching large-scale subsidized mining such as for Bitcoin without a resilient energy base could backfire, especially as regulators and credit agencies look for economic reforms in exchange for financial support.