The latest loan agreement between Imran Khan led PTI government and International Monetary Fund (IMF), poverty, inflation and taxes have tightened the grip on suffering masses of the Pakistan. But its not enough, according to IMF report on Pakistan’s economy, Pakistan has agreed with IMF to further hike the electricity tariff on quarterly adjustments basis by the end of the next month, an IMF report said on Tuesday (July 9).
According to the IMF, “an adequate pricing structure reflective of costs is essential to eliminate the accumulation of circular debt as new capacity comes into the system and to make the sector a more attractive investment opportunity.” It is likely that the increase will be of Rs2.5 per unit from the next month.
“Currently, households consuming 300 units or below (about 70 per cent of all household consumers) are insulated from annual tariff increases. The authorities will continue with this practice and will moreover allocate for this year a new subsidy equivalent to 0.1–0.2 per cent of GDP to insulate those same consumers from the impact of the recently introduced quarterly tariff adjustment,” the report said.
The IMF in its report stated, “Eliminating power sector losses on a sustainable basis will require both new pricing policies and improvements in governance and infrastructure. There are three main sources of arrears in the power sector: effective tariffs below the required levels and only approved with significant delays; implicit subsidies provided by the government that have long remained un-budgeted; and technical and distribution losses. The authorities aim to address the first two sources in the near term while preparing a plan to tackle the third source of arrears over the course of the program.”
The staff report further stated Pakistan’s economy is at a critical juncture. “Pakistan’s economy is facing risks of hike in oil prices in the international market and implementing policies under the IMF programme.”
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27 September, 2019