Pakistan approves hike in power tariff to restart IMF loan programme

ISLAMABAD - Prime Minister Imran Khan has approved an increase of Rs3.43 per unit in electricity price to resume International Monetary Fund’s (IMF) $6 billion loan programme, which is stalled for about ten months. 

The latest surge was indispensible for Pakistan to bring the second review of the three-year Extended Fund Facility (EFF) programme to a positive conclusion. 

The IMF agreed to the rescue package in 2019 as the South Asian country was grappled with a balance-of-payments crisis.

So far, Pakistan has managed to receive $1.44 billion under the loan program. The country was hoping to secure another tranche of about $450 million in March 2020 but the IMF and Islamabad failed to reach an understanding during the second quarterly review.

Succumbing to the pressure by the global lender, PM Khan has given in-principal approve to accept IMF’s demand about rising power tariff but it is yet to decide the increase will be made at once or gradually. 

Following the approval, the economic team of the prime minister has initiated consultation on price hikes and circular debt of Rs1.2 trillion. 

The current power tariff stands at Rs13.35 per unit and it will surge to Rs16.96 after the decision. 

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Raising power tariff is one the basic conditions imposed by the IMF and there would be no headway in second review of the loan programneuntil Pakistan issued notification for new electricity prices, said local media citing sources. 

It was also revealed in the reports that the government was considering revoking tax exemptions for corporate sector as this move would generate Rs200 billion additional taxes.