IMF Rejects Pakistan's Plan for Subsidized Crypto Mining Power

The International Monetary Fund (IMF) has rejected Pakistan's proposal to offer subsidized electricity tariffs for cryptocurrency mining operations. This decision comes as a setback to Pakistan's plans to allocate 2,000 megawatts of surplus power for crypto mining, which was part of a broader strategy to utilize the country's excess electricity capacity. The government had intended to provide electricity at a subsidized rate for Bitcoin mining, leveraging the current surplus of 7,000 megawatts of power.

In a session with the Senate Standing Committee on Power, chaired by Senator Mohsin Aziz, Secretary of Power Dr. Fakhray Alam Irfan outlined the government’s recent efforts to negotiate subsidized electricity tariffs with the IMF. Dr. Irfan explained that the proposal aimed to offer reduced electricity rates to energy-intensive sectors, particularly crypto mining and certain industrial operations, in hopes of spurring economic activity and utilizing surplus power. However, the IMF rejected the idea, arguing that such subsidies could disrupt the energy market and add further strain to the power sector’s already fragile finances.

This follows Pakistan’s earlier announcement of plans to dedicate 2,000 megawatts of surplus electricity specifically for Bitcoin mining and AI data centers under a national digital infrastructure initiative. The project aimed to attract foreign investment, create jobs in emerging technologies, and put idle generation capacity to productive use. The IMF's rejection is based on concerns over the potential economic and financial implications of subsidizing electricity for crypto mining. The fund has expressed reservations about the long-term sustainability of such a policy, particularly in light of Pakistan's existing economic challenges.

Before this latest proposal, the government had floated other measures that also failed to gain the IMF’s approval. In September last year, officials suggested a six-month electricity tariff at marginal cost, pegged at Rs 23 per kilowatt-hour, to support crypto mining and other high-consumption industries. The IMF, however, agreed only to a shorter, three-month plan, citing worries over the potential disruption such incentives might create in the market’s equilibrium. Later in November, the government tried again with a targeted subsidy specifically crafted to encourage surplus electricity consumption, but the IMF dismissed that as well, likening it to sector-specific tax holidays that risk economic imbalance.

Despite these setbacks, Dr. Irfan assured the committee that discussions with the IMF and other international bodies remain ongoing in search of a workable solution. The IMF's decision is likely to have significant implications for Pakistan's energy sector and its plans to diversify its economy. The rejection of the subsidized electricity proposal for crypto mining may prompt the government to explore alternative strategies for utilizing its surplus power and attracting investment. It also serves as a reminder of the importance of aligning energy policies with broader economic and environmental goals.

Pakistan's plan to offer subsidized electricity for crypto mining was seen as a way to attract investment and generate revenue. However, the IMF's pushback highlights the need for a balanced approach that considers both the potential benefits and the risks associated with such initiatives. The rejection also raises questions about the future of Pakistan's energy policies and its ability to attract investment in the cryptocurrency sector without compromising its economic stability. The IMF's stance underscores the broader debate surrounding the environmental and economic impacts of cryptocurrency mining, which is known for its high energy consumption.