Pakistan: Electricity to become unaffordable as IMF rejects debt management plan
An IMF delegation, which is on a review mission for a possible financial bailout, has rejected the revised Circular Debt Management Plan (CDMP) put forward by the Pakistan government
Pakistan has been facing energy woes for months. AP
Islamabad: Even as Pakistan sinks deeper into a spiraling economic crisis, the country has been handed even more reasons to worry by the International Monetary Fund (IMF).
An IMF delegation, which is on a review mission for a possible financial bailout, has rejected the revised Circular Debt Management Plan (CDMP) put forward by the Pakistan government.
According to a report by ‘The News International’, the IMF has called on the Pakistan government to impose a further hike in the electricity tariff.
This increase, which is projected to be in the range of Pakistani Rupees (PKR) 11-12.50 per unit, is expected to contain the additional subsidy at PKR 335 billion for the current financial year.
“The IMF has opposed the certain basis of the revised CDMP and asks the government to raise the tariff in the range of Rs 11 to Rs 12.50 per unit, so that the requirement of additional subsidy could be reduced to half from its existing levels of Rs 675 billion for the current fiscal year,” The News International quoted officials as saying.
However, if implemented, this move will further increase the already heavy financial burden on the common people, who are plagued with extremely high electricity bills. The current electricity tariff in Pakistan is around PKR 25.
The IMF delegation, which reached Pakistan on Monday, is holding talks with the authorities in the country in order to complete the pending ninth review under the USD 7 billion Extended Fund Facility (EFF).
Circular debt takes place when an entity, which is facing difficulties with cash inflows fails to make payments to suppliers and creditors.
The IMF has called the revised CDMP “unrealistic”, and has said that it has been made on the basis of several wrong assumptions.
Following the IMF assessment, the Pakistan government will now have to effect several changes in its policy prescription in order to contain the losses of the power sector.
According to a report by news agency ANI, the IMF will hold talks with the defence ministry of Pakistan in order to work out a solution regarding the fiscal front after which various additional taxation measures will be finalised through the upcoming mini-budget.
The revised CDMP has recommended a hike of around PKR 952 billion in the circular debt for the current financial year against an earlier projection of PKR 1,526 billion.
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