Gas Price Hike
In a decisive move, the caretaker government has opted to raise gas prices in January 2024, citing the surge in fuel usage during the approaching winter season. Interim Finance Minister Shamshad Akhtar conveyed this decision to Islamabad reporters, linking it to discussions about the International Monetary Fund (IMF) program.
During Wednesday’s announcement, the international lender and Pakistan reached a staff-level agreement, paving the way for a $700 million disbursement under the first review of a $3 billion standby arrangement, pending approval from the Fund’s Executive Board.
This marks another escalation in gas prices following the caretaker cabinet’s approval of a substantial increase last month—up to 3,900% in fixed monthly charges and 194% in consumer rates for natural gas. Notably, this tariff adjustment is expected to spare 57% of consumers, according to government assurances. The previous government had similarly raised gas tariffs in February, aiming to secure an essential IMF deal.
With Pakistan facing an annual gas depletion of 8% to 9% from its own reserves, the caretaker government is actively seeking solutions. Bids for 10 onshore blocks are set to open this month, and plans are underway to invite bids for 24 offshore blocks in December, as disclosed by interim Power Minister Muhammad Ali on September 8.
Addressing concerns about potential sectoral taxes, Minister Akhtar clarified that no decision has been made yet, refuting media claims that the IMF urged taxation on real estate and retail. The IMF, in its statement, acknowledged Pakistan’s efforts to expand the tax base and enhance revenue mobilization.
Minister Akhtar emphasized the government’s primary focus on achieving the Federal Board of Revenue’s tax collection target of Rs9,415. Any shortfall, she mentioned, would prompt consideration of additional measures.
The decision to defer a $1.5 billion international bond issuance until finalizing the IMF agreement was explained as a strategy to enhance the country’s ratings. Following the IMF’s successful review, the stock market and the rupee experienced notable gains, with the KSE-100 index closing at 57,397.02 points, up 716.96 from the previous day.
Anticipating further financial support, Minister Akhtar revealed expectations of $2 billion from the World Bank and approximately $1 billion from the Asian Development Bank, Islamic Development Bank, and Asian Infrastructure Investment Bank. While acknowledging economic improvements, Minister Akhtar stressed the need to stay committed to the IMF program, citing its importance until there is a significant boost in exports and local manufacturing.
She expressed the urgency to initiate work on the last installment of $1.1 billion under the nine-month loan program, noting that the IMF did not attach additional conditions for releasing the second installment of $700 million.” Overall, Winter prompts gas price hike as the caretaker government decides on January 2024 fuel cost increase for the nation.
