ISLAMABAD: Pakistan has successfully persuaded the International Monetary Fund (IMF) to approve a reduction of Rs2 per unit in electricity rates, sources revealed on Tuesday.
IMF Policy Talks Underway for $1 Billion Loan Tranche
Pakistan and the IMF have commenced policy-level discussions regarding the disbursement of a $1 billion loan tranche under the ongoing financial package. During an extensive negotiation session, Pakistani officials pushed for a reduction in electricity tariffs by Rs1.5 to Rs2 per unit.
While the final decision on the tariff cut is expected next month, the IMF has agreed in principle to lower the base tariff.
IMF Links Tariff Cut to Power Sector Privatization
To implement the tariff reduction, Pakistan must submit a comprehensive privatization plan for its power distribution companies (Discos). The IMF has expressed dissatisfaction with Discos’ performance, citing heavy losses and inefficiencies as key obstacles to energy sector reforms.
Pakistan has proposed a phased privatization of three Discos in the first phase:
- Islamabad Electric Supply Company (IESCO)
- Faisalabad Electric Supply Company (FESCO)
- Gujranwala Electric Power Company (GEPCO)
The next phase will focus on the privatization of:
- Multan Electric Power Company (MEPCO)
- Lahore Electric Supply Company (LESCO)
- Hyderabad Electric Supply Company (HESCO)
The IMF has emphasized that energy sector revival is impossible without privatization, sources disclosed.
Key Discussions: NFC, Agricultural Tax, and Circular Debt
In addition to power sector reforms, talks have covered:
- National Finance Commission (NFC): Discussions on revenue distribution between the federal government and provinces.
- Agricultural Income Tax: Pakistan has highlighted a revenue potential of Rs300 billion from agricultural taxation.
- Circular Debt Management Plan:
- Pakistan has proposed a Rs1,250-billion reduction in circular debt.
- The government is considering borrowing Rs1,250 billion from banks at a 10.8% interest rate to address the crisis.
- A surcharge of Rs2.8 per unit on electricity consumers is being proposed to repay the loans.
A dedicated session with the National Electric Power Regulatory Authority (NEPRA) is also scheduled, where Pakistan will update the IMF on the implementation of NEPRA’s power tariff decisions.
The ongoing negotiations will play a critical role in shaping Pakistan’s energy and financial landscape, ensuring long-term stability and sustainability in the power sector.
