The International Monetary Fund (IMF) has rejected Pakistan’s initiative to allocate 2,000 megawatts (MW) of surplus electricity for Bitcoin mining and artificial intelligence (AI) data centers, citing concerns over market distortions, legal ambiguities, and risks to the country’s fragile power sector.
Despite the government’s optimism, the IMF swiftly dismissed the proposal. In testimony before the Senate Standing Committee on Power, Secretary of Power Dr. Fakhray Alam Irfan confirmed that the IMF had not agreed to the initiative, warning that such targeted subsidies could:
- Distort the already troubled energy market.
- Create economic imbalances similar to those caused by past sector-specific tax breaks.
- Undermine efforts to transition the power sector to market-based pricing.
The IMF also raised concerns about the government’s plan to gradually phase out the subsidized rates, highlighting the legal status of large-scale crypto mining in Pakistan and the potential strain on the country’s power infrastructure.
Pakistan Experiences Setback On Digital Ambitions
The rejection comes at a time when Pakistan is seeking to reinvent itself as a digital economy leader. In May, the government legalized Bitcoin mining and announced the creation of a strategic Bitcoin reserve, following the example of the United States. The Pakistan Digital Assets Authority (PDAA) was launched to regulate crypto activities and ensure compliance with international standards.
The digital transformation plan includes several key points. First, it allocates 2,000 MW of surplus electricity for Bitcoin mining and AI data centers. Second, the plan offers tax incentives and duty exemptions to attract potential investors.
Third, the government is working on establishing a strategic Bitcoin reserve. Finally, it aims to create jobs in AI, blockchain, and data infrastructure sectors.
Way Forward
Although officials emphasize that the proposal is still alive, the IMF’s decision is a major blow. To improve the proposal and address the IMF’s concerns, the government is currently collaborating with the World Bank and other international partners, Dr. Irfan stated.
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