Setting up solar power systems is about to become considerably more expensive for consumers in Pakistan, as the government considers a substantial tax hike on solar panels in the upcoming federal budget for the fiscal year 2026-27.
According to sources close to the development, the International Monetary Fund (IMF) has strongly opposed tax exemptions historically granted to the country’s affluent classes and has demanded their immediate withdrawal. As part of its stringent conditions, the global lender has categorized solar panels, along with electric and hybrid vehicles, as luxury items primarily utilized by the elite. In compliance with the IMF’s mandate, a proposal is currently under review to increase the sales tax on solar panels from the current 10% to 18% in the upcoming fiscal budget. Financial experts warn that this 8% jump will significantly drive up the upfront costs of solar installations, making renewable energy far less accessible for ordinary citizens already battling high electricity tariffs.
The government is currently locked in negotiations with the IMF for a new, long-term bailout package. Sources emphasize that given the country’s economic constraints and the fund’s strict preconditions, the administration has been left with little choice but to broaden the tax net and eliminate existing subsidy structures. The move comes at a critical juncture when middle-class households are aggressively shifting to solar energy to offset soaring grid electricity bills, meaning the tax hike could severely decelerate the country’s green energy transition.