ISLAMABAD: To revive the stalled IMF programme, the government will have to increase the electricity tariff by Rs7/per unit through base price and fuel price adjustments as well as increase the petrol prices in a gradual manner.
To avoid backlash of public, the government is considering increasing only petrol prices and it will continue subsidies on diesel. The government is also exploring options to convince the provinces to contribute by sharing the burden to absorb the fuel cost.
The work on devising targeted subsidies is also underway at the senior level of the government, Geo News reported today.
The government will have to hike electricity by Rs4.79 per unit as a base price and another Rs2.35 per unit as outstanding fuel price adjustment, because the IMF is demanding an increase of Rs7.14 per unit for curbing increase in circular debt.
Pakistan and the IMF are scheduled to hold review talks from May 18, for making renewed efforts to strike a staff-level agreement that can pave the way for seeking approval of the fund’s executive board for the release of the next tranche worth $1 billion.
Through the withdrawal of subsidies, it is feared that it will fuel more inflationary pressures, which already stood at 13.4% and it might further go up in the remaining months of the current fiscal year.
It is estimated that in case of keeping prices unchanged, the government would have to bear the cost of Rs140 billion till June 2022 for four months period from March to June of the current fiscal year.