ISLAMABAD – Pakistan is unlikely to accept one of the conditions of the International Monetary Fund (IMF) for new loan programme to increase power tariff to reduce the mounting circular debt of the country.
“We are not in position to further increase the power tariff as the government had already done so,” said a cabinet member of PTI government while talking to The Nation wishing not to be named. He further said that government is controlling the line losses and power theft to reduce the circular debt of the country. The government recently increased the power tariffby Rs1.27 per unit with Rs130 billion per year burden on end consumers, he added.
He said that government is working on a plan to reduce and control the circular debt. The government plans to raise Rs200 to Rs300 billion via 10-year privately placed Sukuk bonds to fund staggering circular debt in the power sector. The IMF had expressed concerns over the circular debt, which the government is already working to control, he concluded.
Pakistan had formally submitted to the IMF its Memorandum of Economic and Financial Policies (MEFP) envisaging macroeconomic stabilisation graduating into growth strategy over the next three years. Earlier in last month, talks between Pakistan and IMF had concluded inconclusively due to differences on many issues. Pakistan had refused to accept tough conditions of the IMF for bailout package. The IMF had recommended the government to increase the power tariff by 20 percent to control the soaring circular debt of the country. Similarly, it had suggested for fresh revenue generation measures worth of Rs100 billion to Rs150 billion in order to increase the overall tax collection of the country. Furthermore, the Fund had asked to depreciate the currency and increase the interest rate.
Apart from increasing power tariff , the government had apparently accepted the other three conditions of the IMF. The State Bank of Pakistan (SBP) had recently allowed the US dollar to appreciate by Rs7-8 in the open market to Rs140. Some reports suggested that the dollar value will ultimately settle somewhere between Rs145 and Rs150 if Pakistan reaches a deal with the IMF. The SBP had also increased the interest rate to 10 percent. It seems that interest rate might be further increased in the next monetary policy announcement.
Meanwhile, the government had also showed its plan to bring mini-budget in next month to generate additional revenue, which was one of the conditions of the IMF. Finance Minister Asad Umar other day had hinted for the fresh taxation measures during the meeting of Senate Standing Committee on Finance and Revenue. He informed that there is possibility that government may announce mini budget in January. He said that the government is reviewing the suggestions to increase tax and tariff on imports and in this regard. However, final decision has not been taken yet, he said.
The government is mulling to announce another mini budget o bridge the tax collection shortfall that had gone to Rs100 billion in five months (July to November) of the ongoing fiscal year.