This paper addresses the emerging gap between students’ positive perceptions of Generative Artificial Intelligence (GAI) tools in programming education and their demonstrated ability to work effectively with AI-generated code. Drawing on empirical data from student perceptions and performance, we propose a framework for AI literacy in programming education. The framework identifies five core competencies: critical evaluation, error detection and correction, appropriate reliance, prompt engineering, and awareness of AI ethics. We present an assessment framework aligned with these competencies and discuss implications for programming curriculum design. This study contributes to addressing the critical need for targeted educational approaches that prepare students to leverage AI tools effectively while maintaining essential programming skills.