ISLAMABAD: Government rolled out initial measures following the opening day of ‘make-or-break talks’ with the International Monetary Fund (IMF). While technical discussions on expenditure cuts and revenue measures would follow over the next couple of days.
The obvious and expected initial measures instituted by the government include increase in power tariff, energy cost. Besides, the plan to manage circular debt management and deferred fuel cost adjustment plans are charted out
The technical-level deliberations on expenditure cuts & revenue streams measures in the first round will move on to the policy-level negotiations in next week until Feb 9.
Agenda of Talks
The meeting reviewed the economic policies and discussed reforms agenda to accomplish the 9th review under the Extended Fund Facility. The ministry stated that Dar briefed the mission on fiscal and economic reforms. It included bridging the fiscal gap and exchange-rate stability in the energy sector for the betterment of the economy.
Energy Prices Hiked further
The price of liquefied petroleum gas LPG is increased by 30pc, while a minimum of Rs6 per unit increase in electricity rates is finalized between now and August. This increase was on top of an earlier hike in petroleum rates by up to 16pc.
Circular Debt Management Plan
The finance and power ministries have jointly finalized the “revised circular debt management plan” based on a circular debt of Rs2.253tr as of June 30, 2022. Payables to power producers had already gone beyond Rs1.25tr.
Under the plan, the government would address about Rs952bn worth of debt management during the current fiscal year, including Rs675bn worth of additional subsidies. About Rs200bn additional funds would be recovered from consumers through the increase in base tariff on top of outstanding quarterly adjustments from the last year.
The Power Tariff
The government raise the power tariff by Rs3.21 per unit in the first quarter (Feb-March). This followed by another 70-paisa increase in the March-May period and then a Rs1.64 hike in the June-August quarter. This would yield about Rs80bn until August.
Recovery of Deferred Fuel Cost Adjustment
Another Rs90bn would be charged through the recovery of deferred fuel cost adjustments and markup on existing loans parked in the Power Holding Company.
Power Sector Reforms
The minister said reforms were being introduced in the power sector. He shared that a high-level committee had been formed for devising modalities to offset the menace of circular debt in the gas sector. He added that the IMF and Pakistan would be working together on fiscal reforms.
nathan Porter still Adamant citing fiscal Gap
The visiting IMF mission Chief to Pakistan Nathan Porter however adamant of calibrated, upfront and strong measures to bridge the fiscal gap of Rs2tr to Rs2.5tr, indicated more needs to be done and that “You don’t have any other option” came as a critical message.
the meeting Delegation
The visiting delegation was led by Nathan Porter, while Ishaq Dar led the government delegation. Ahead of the meeting ,Dar had a meeting with resident representative Esther Perez Ruiz as well.
The government delegation comprised of Governor SBP Jameel Ahmad, Secretary Finance Hamed Yaqud, and FBR Chairman Asim Ahmed. Dr Aisha Ghous Pasha, The State Minister for Finance and Revenue was also present.