Pakistan’s attempt to kick-start a national Bitcoin mining initiative has reportedly been derailed after the International Monetary Fund (IMF) rejected proposals to provide subsidized electricity for mining operations. The move highlights the growing tension between Pakistan’s search for alternative revenue streams and its commitments under IMF financial support programs.

IMF: Mining Subsidies Risk Economic Stability

Sources close to Pakistan’s energy and finance ministries told local media that the government floated the idea of allocating surplus or low-cost power, particularly from hydroelectric sources in Khyber Pakhtunkhwa and Gilgit-Baltistan, to support state-backed Bitcoin mining farms. The plan aimed to tap into the global crypto economy and boost foreign currency reserves, as Pakistan faces a severe dollar liquidity crunch.

However, the IMF, which recently approved a fresh $1.1 billion disbursement under Pakistan’s Extended Fund Facility (EFF), reportedly blocked the proposal. The Fund warned that subsidized electricity for crypto mining could:

• Destabilize the national energy grid, already under pressure from chronic load shedding and circular debt exceeding ₨2.8 trillion ($10 billion).

• Undermine energy sector reforms aimed at cost recovery and efficiency improvements.

• Create fiscal liabilities at a time when Pakistan’s budget deficit is projected to surpass 7% of GDP this year.

• Exacerbate regulatory and reputational risks, given ongoing global scrutiny of crypto activities linked to illicit finance.

Pakistan’s Economic Context

Pakistan is grappling with deep economic challenges, including inflation hovering around 23% and a depreciating rupee trading near historic lows at ₨315 per dollar. Power shortages, rising energy import bills, and public discontent over electricity prices have made energy sector reforms a centerpiece of IMF-mandated structural adjustments.

Against this backdrop, officials had hoped Bitcoin mining — already popular at small scales in some northern regions — could evolve into a formal, revenue-generating industry. But critics argue the country cannot afford to divert precious energy resources away from households and industries.

Crypto Mining Dreams on Hold

The government’s plan aimed to position Pakistan as a regional mining hub, especially as other jurisdictions like Kazakhstan tighten crypto regulations. Yet without cheap and reliable electricity, large-scale mining may remain unviable. Industry observers note that informal mining will likely persist, but Pakistan’s hopes for state-led crypto mining now appear shelved — at least while IMF support remains critical.

What’s Next for Pakistan’s Crypto Strategy?

Analysts suggest Islamabad may pivot towards:

• Developing crypto taxation and regulatory frameworks to attract foreign investment in blockchain and fintech without burdening the energy sector.

• Exploring blockchain applications in governance, trade, and remittances that have lower energy footprints.

As the government prepares for upcoming negotiations on the next IMF program, balancing innovation with macroeconomic discipline will remain a key challenge.