IMF Delays Relief as Pakistan Fails to Meet Deadline for Inflated Electricity Bills
The International Monetary Fund (IMF) has reportedly caused a delay in providing relief to Pakistan for its inflated electricity bills, despite a 48-hour deadline set by caretaker Prime Minister Anwar-ul-Haq Kakar. The deadline expired without any announcement of relief due to resistance from the IMF, according to official sources.
It is said that the IMF has not yet given its approval for Pakistan’s request to defer the payment of electricity bills. Negotiators from both sides have been facing difficulties in reaching a consensus on the formula for staggered payments to tackle the issue of inflated bills.
Pakistan had shared its plan with the IMF earlier this week, which included providing relief of up to 400 units of electricity for those affected by inflated bills. The IMF, however, raised concerns about how the required subsidy amount would be financed without increasing the overall size of the allocated power sector subsidy for the current fiscal year.
In response, the Ministry of Finance assured the IMF that they would comply with all the targets set by the IMF, including a ban on supplementary grants for additional subsidy amounts. The ministry presented a plan in which additional resources from an emergency allocation of Rs250 billion could be diverted towards meeting the subsidy requirements for the power sector. The plan also aimed to ensure that the IMF’s targets for power subsidy, accumulation in circular debt, and primary surplus would not be breached.
However, the IMF raised doubts regarding the sustainability of Pakistan’s power sector and sought assurances that the situation would not arise again. The collection of electricity bills by power distribution companies (Discos) had significantly declined while capacity repayments to independent power producers (IPPs) had reached a staggering Rs2,200 billion for the current fiscal year. The heavy losses incurred by Discos, both financially and technically, further added to the financial strain.
The IMF emphasized the need for fundamental structural changes in the power sector, including reducing reliance on imported fuel, exploring domestic resources for power plant construction, promoting solar energy, tackling theft and transmission losses, and other measures. These changes are deemed critical to ensure the long-term sustainability of the power sector.
Without these reforms, Pakistan’s power sector will continue to face challenges and will remain financially unsustainable. The government needs to address these issues in order to provide relief to power consumers burdened by inflated electricity bills.
It remains to be seen how Pakistan will overcome the hurdles posed by the IMF and formulate a comprehensive plan to address the financial strain in the power sector. The outcome of the negotiations will have far-reaching implications for the country’s energy landscape and the lives of its citizens.
