International Monetary Fund (IMF) Declines Pakistan's Proposal to Subsidize Energy Consumption for Cryptocurrency Mining Operations

Pakistan's ambitious plans to tap into the lucrative world of cryptocurrency mining have hit a roadblock, as the International Monetary Fund (IMF) has rejected the proposal to offer subsidised electricity tariffs for the energy-intensive industry.

The IMF's decision stems from concerns that such subsidies would distort energy markets and exacerbate the fragility of Pakistan’s electricity sector, which is already burdened with over $4.5 billion in circular debt. The IMF warned that subsidized power rates targeted at energy-intensive industries like crypto mining could destabilize the country’s energy infrastructure.

Pakistan had proposed to offer discounted electricity at about $0.08 per kWh, allocating 2,000 megawatts of surplus electricity—primarily during winter months when demand is low—to crypto mining operations. The government aimed to leverage this surplus to attract foreign investment, create tech jobs, and generate approximately $500 million annually, hoping to offset costs associated with idle power plants.

However, the IMF emphasized that such targeted subsidies risk creating market imbalances and undermining broader economic stability. The rejection reflects the priority given to maintaining energy market stability and preventing further deterioration of the national power sector.

The impacts of the IMF’s rejection are significant. It hinders Pakistan’s ambitions to become a regional crypto mining hub and limits its digital transformation strategy. Pakistan must now engage in further negotiations with the IMF and other international partners like the World Bank to revise its energy subsidy plans in line with global standards.

The decision has also raised concerns over energy shortages and fiscal risks, as the government considers allocating 2,000 megawatts of electricity to Bitcoin mining and AI data centres. Independent director Pranav Agarwal, from Jetking Infotrain India, a Bitcoin treasury company, suggests a measured approach to crypto mining in Pakistan, prioritizing sustainability and gradual implementation.

In recent months, Pakistan has embraced the crypto world, establishing the Pakistan Crypto Council, appointing Changpeng Zhao as strategic advisor, and creating the Pakistan Digital Assets Authority in March. However, the government's failure to consult the IMF on this move has triggered concerns from the Fund.

Bilal Bin Saqib, special assistant to the prime minister on blockchain and cryptocurrency, announced the creation of Pakistan's strategic Bitcoin reserve and vowed that the country would "never, ever sell" its holdings. Saqib also advises the Trump-linked crypto project World Liberty Financial.

The IMF's rejection follows months of back-and-forth between Islamabad and the IMF over plans to boost industrial consumption of surplus electricity. The Fund has refused to support targeted electricity packages for sectors such as crypto mining, despite surplus power during winter months.

Industry experts like Agadi, from an unspecified organization, emphasize the importance of prioritizing sustainability and economic equity in countries benefiting from Web3. The rejection of Pakistan's proposal underscores the need for careful consideration and global standards in implementing digital transformation strategies.

[1] https://www.dawn.com/news/1679558 [2] https://www.thenews.com.pk/print/1056173 [3] https://www.dawn.com/news/1698384 [4] https://www.dawn.com/news/1708997

The International Monetary Fund (IMF) has rejected Pakistan's proposal to offer subsidized electricity tariffs for cryptocurrency mining, citing concerns about distorting energy markets and exacerbating the country's electricity sector issues.
Pakistan had aimed to leverage surplus winter electricity to attract foreign investment, generate tech jobs, and annually produce $500 million, primarily through Bitcoin mining.
The IMF's rejection poses challenges to Pakistan's ambitions of becoming a regional crypto mining hub and implementing its digital transformation strategy.
Independent director Pranav Agarwal suggests a measured approach to crypto mining in Pakistan, prioritizing sustainability and gradual implementation.
Pakistan's special assistant to the prime minister on blockchain and cryptocurrency, Bilal Bin Saqib, has announced the creation of Pakistan's strategic Bitcoin reserve and expressed his commitment to maintaining the country's holdings.
The IMF's rejection follows prolonged negotiations over plans to boost industrial consumption of surplus electricity, with the Fund refusing to support targeted electricity packages for sectors such as crypto mining.
Industry experts stress the importance of prioritizing sustainability and economic equity in countries benefiting from Web3, with the rejection of Pakistan's proposal serving as a reminder of the need for careful consideration and adherence to global standards in implementing digital transformation strategies.

International Monetary Fund (IMF) Declines Pakistan's Proposal to Subsidize Energy Consumption for Cryptocurrency Mining Operations