IMF Blocks Pakistan’s Crypto Mining Initiative Amidst Financial Concerns
Pakistan’s ambitions to stimulate its cryptocurrency mining sector through a subsidised electricity plan have hit a significant roadblock, following a rejection from the International Monetary Fund (IMF). In a proposal put forth by the Power Division in November 2024, the government sought a targeted electricity pricing structure, offering rates between US$0.08 and US$0.081 (equivalent to AU$0.12) per kilowatt-hour aimed primarily at energy-intensive industries, including Bitcoin mining.
However, the IMF dismissed this proposal, voicing concerns about potential market distortions and the exacerbation of fiscal instability within Pakistan’s already fragile energy sector, which currently faces a staggering circular debt exceeding US$4.5 billion (AU$6.84 billion). The Fund underscored that this plan could further destabilise the economic landscape, drawing comparisons to previous sector-specific tax incentives that failed to yield positive results.
Power Secretary Dr Fakhray Alam Irfan revealed to the Senate that this plan remains under review by both the World Bank and other relevant institutions. The IMF’s decision followed a similar outcome in September 2024, where it sanctioned only a temporary three-month tariff scheme due to analogous concerns. Authorities had hoped to attract investments in cryptocurrency mining by leveraging surplus electricity during the winter months, aiming to alleviate financial pressures related to idle energy production.
Economic Viability of Crypto Mining in Pakistan
The economic landscape for cryptocurrency mining in Pakistan continues to be daunting, primarily due to the exorbitant cost of electricity. Current industrial electricity rates hover around US$0.22 (AU$0.33) per kilowatt-hour. This high pricing means that the cost of mining a single Bitcoin could reach approximately US$132,000 (AU$200,692), substantially outstripping the cryptocurrency’s market value.
In addition to the high costs, the physical infrastructure in Pakistan remains a significant hurdle. The nation’s ageing power grid experiences frequent outages and high transmission losses, which detract from the reliability required for continuous mining operations.
Despite these considerable challenges, the Pakistani government is maintaining its pro-crypto stance. In recent developments, it has appointed Bilal Bin Saqib as a blockchain advisor to the Prime Minister and has announced the establishment of a national Bitcoin reserve. These initiatives are part of broader efforts to form the Pakistan Crypto Council, geared towards attracting foreign investment through various regulatory and fiscal reforms.
Nonetheless, the IMF’s disapproval signifies a continuing apprehension among global financiers regarding Pakistan’s capacity to implement targeted subsidies without jeopardising overall economic stability. This scenario forces the country to reconsider its digital expansion strategies whilst carefully balancing its macroeconomic objectives.
Conclusion
The IMF’s blockage of Pakistan’s subsidised electricity plan for crypto mining highlights the delicate balance the nation must navigate between fostering innovation in the digital economy and adhering to fiscal responsibility. As Pakistan progresses with its crypto agenda, the government must address both structural challenges and international concerns to create a sustainable environment for cryptocurrency investment.
