Pakistan govt approves massive hike in power tariff on IMF demand: Report

In Pakistan, the federal cabinet authorized a significant increase in the electricity base rate through a circulation summary in a late-night decision. The government has raised the basic power tariff by ₹3 for some customers and by ₹7.5 per unit for others, according to a report published by ARY News. 

The proposal stated that the government recommended an increase of PKR 3 per unit for the non-protected residential consumers using 1 to 100 units which will take the current per unit cost from PKR 13.48/unit to 16.48/unit. 

Similarly, for the residential consumers using above 700 units, the government proposed a hike of ₹7.5/unit from the existing PKR 35.22/unit to 42.72/unit, ANI reported, citing ARY News. 

Sources informed that the government has sent the matter to the Nepra to increase the tariff and the regulator will hold a public hearing to decide the matter before releasing a final notification. If approved, the new tariff will take effect from July 1.

On July 14, Nepra allowed the federal government an increase of PKR 4.96/unit in base electricity tariff. The move comes as Prime Minister Shehbaz Sharif had reassured IMF Managing Director Kristalina Georgieva that he would not tolerate an iota of violation of the agreement reached with the global lender. 

The International Monetary Fund asked Pakistan to hike the power and gas tariffs further as details of the IMF-Pakistan deal emerged, ARY News reported. 

According to the Pakistan-IMF deal, Pakistan needs to be strict with the monetary policy to decrease inflation in the country. The Washington-based financial body also welcomed the increase in the interest rate by Pakistan. 

IMF asked Pakistan to gradually decrease the subsidy in the power sector, and expenses related to salaries and pension. The country needs to make reforms regarding pensions. It also warned Pakistan to not take new loans from the State Bank and clear the pending dues of the power sector.

The unemployment rate which was 6.2 in 2022, may rise to 8.5 per cent in 2024 in Pakistan, the report added. The financial loss of Pakistan will remain at 7.5 percent and the debt ratio will be 74.9.

It is pertinent to mention here that the IMF executive board approved the bailout loan program of USD 3 billion this week after months of delay, boosting Pakistan’s financial stability ahead of elections this year. Fitch Ratings upgraded Pakistan this week on the improving funding environment.

Later, the State Bank of Pakistan (SBP) received USD 1.2 billion from the International Monetary Fund (IMF) as the first tranche of a USD 3 billion bailout to stabilize the economy.

Finance Minister Ishaq Dar, said in a television statement that the remaining USD 1.8 would be released after two reviews, meaning that there would be two instalments.

Pakistan’s foreign reserves had jumped by USD 4.2 billion during the last four days, he said – in a reference to a USD 2bn deposit made by Saudi Arabia and another USD 1bn received from the United Arab Emirates (UAE). 

(With ANI inputs)