PAKISTAN NEEDS ANOTHER LIFELINE FROM IMF FOR THREE YEARS: PM SHEHBAZ
HINTS AT TOUGH ECONOMIC DECISIONS TO STEER COUNTRY OUT OF CRISIS CLAIMS BURDEN OF THESE MEASURES WOULD PRIMARILY FALL ON WEALTHY AND ELITE IMF directs Pakistan to expedite tariff rebasing for Discos
PRIME Minister Muhammad Shehbaz Sharif on Thursday said that Pakistan wanted to negotiate another loan programme from the International Monetary Fund (IMF) spanning over three years, hinting at tough economic decisions to steer the country out of the crisis.
Addressing the meeting of the Apex Committee of Special Investment Facilitation Council (SIFC) here, the prime minister said the IMF had concluded the final review for the last tranche of$1.1 billion that will hopefully be received by next month.
After this, he said, Pakistan also wanted to start another programme with the IMF for a period of three years during which the government will take strict measures to bring deep-rooted structural reforms in the country.
He was of the view that the government was going to make tough economic decisions to steer the country out of crisis assuring to protection of downtrodden segments of the society. He said that the burden of these measures would primarily fall on the wealthy and elite, with safeguards in place to protect the interests of the poor and vulnerable.
With the reforms, he said “we will succeed in gradually breaking the begging bowl and come out of the debt trap”.
The prime minister sought the support of all political parties and the provincial governments to successfully implement the agenda of macroeconomic stability in the country.
“For this, we will have to work together. With the support of all the provinces, we will together resolve all the challenges and difficulties faced by the country”, he added.
The International Monetary Fund (IMF) has instructed the Power Division of Pakistan (PD) to ensure timely tariff rebasing, directing power Distribution Companies (Discos) to submit their tariff petitions for the 2024-25 fiscal year, as reported by Business Recorder. Sources familiar with the matter reported that the IMF emphasizes the importance of meeting the deadlines for these petitions, which are set to take effect from July 1, 2024.
The upcoming rebasing will not only determine the necessary tariff increase but also update longstanding reference figures.
During discussions, the IMF team inquired about the expected tariff increase through rebasing. The Power Division, however, has yet to finalize these figures due to disagreements over the projections for the fiscal year 2024-25.
Regarding Pakistan’s circular debt issue, sources indicated that the Power Division is aligned with the IMF’S targets, achieving a circular debt figure of Rs378 billion against a target of Rs385 billion by December 2023.
Additionally, the division is progressing with reforms, including the privatization of
Discos and the finalization of the Integrated Generation Capacity Expansion Plan (IGCEP) scheduled for April 2024.
The IMF, in a press release dated March 20, 2024, advised the government to continue with timely power and gas tariff adjustments to ensure tariffs reflect actual costs while protecting vulnerable consumers through progressive tariff structures.
The Fund also recommended accelerating cost-reduction reforms in the energy sector, including enhancements in electricity transmission and distribution, integration of captive power demand into the grid, and strengthening governance and management of distribution companies.
The Power Division addressed additional inquiries from the IMF, confirming that the budgeted Rs48 billion for 2023-24 is allocated for CPEC Independent Power Producers (IPPS) and explaining the January 2024 Fuel Charges Adjustment (FCA) of Rs7 per unit was a result of system constraints, as clarified in a recent public hearing chaired by the National Electric Power Regulatory Authority (Nepra). The Power Division is aiming for an early completion of tariff rebasing to mitigate the financial impact of FCAS and Quarterly Tariff Adjustments (QTAS), seeking to lessen the burden currently passed on to consumers.