IMF halts Pakistan’s power relief plan amid ongoing electricity sector troubles

The International Monetary Fund (IMF) has reportedly halted Pakistan’s plan to give relief to power consumers using over 200 units monthly, according to ARY News on Wednesday. The IMF warned that circular debt would not decrease if relief was provided on electricity bills. As a result, only consumers using under 200 units for six consecutive months will receive relief in the form of delayed bill payments. However, this relief will be revoked if a consumer’s bill exceeds 200 units within a six-month period.

Earlier this week, Caretaker Minister for Energy and Petroleum, Muhammad Ali, stated that the IMF had not rejected the proposal for additional subsidies in power tariffs as the government grapples with protests against high electricity bills. Despite these claims, the electricity sector continues to struggle even after the Quality Tariff Adjustment (QTA) mandate to raise rates by PKR 5 per unit in the current month and Fuel Price Adjustments (FPAs) by PKR 2.72 per unit. In total, a rate increase of more than PKR 7 per unit is planned.

These QTAs are calculated based on losses from the April-June period due to lower unit consumption, increased interest payment costs, and exchange rate fluctuations. Amid an economic crisis earlier in July, Pakistan raised the electricity base rate by PKR 7.5 per unit. The National Electric Power Regulatory Authority (NEPRA) permitted the federal government to increase the base electricity tariff by PKR 4.96/unit on July 14.

In addition, Pakistan’s interim government has requested the power regulator to start charging an extra PKR 5.40 per unit for quarterly tariff adjustments over six winter months beginning in October. This move is a departure from the typical three-month adjustment period.

The primary cause behind the current power tariff is currency depreciation, accounting for nearly 70% of the increase. Given the IMF programme, the government currently has no options to control this issue. Furthermore, a 10-12% hike is due to interest rates, and both the government and the State Bank of Pakistan’s (SBP) actions are limited under the IMF programme.

The interim prime minister of Pakistan emphasized their mutual commitment to enhancing economic stability and growth in Pakistan during a meeting on Thursday.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Source link