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Power sector: Govt has Achilles heel somewhere, IMF finds it

  • Finance Ministry and Power Division hold threadbare discussions with IMF
Published February 7, 2023
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ISLAMABAD: Circular debt’s unexpected growth, subsidy to untargeted domestic consumers and five zero-rated sectors have reportedly irritated the visiting International Money Fund (IMF) Mission, which has suggested an increase of over Rs 5 per unit and withdrawal of subsidies, well-informed sources told Business Recorder.

The government’s team comprising Finance Ministry and Power Division again held threadbare discussions on the data, which has been shared with the Fund and World Bank, the sources added. The country’s circular debt is now over Rs 2.5 trillion due to a dismal performance of power sector.

The Finance Minister, sources said, has put a bar on any Minister or official of any Ministry, except designated authorities of Finance Division to talk to the media claiming that talks with the Fund are of a very sensitive nature which is why no other official except Finance Division should speak to the media.

Talks extended for two days: IMF demands govt withdraw power subsidy

“Finance has taken some kind of oath from officials of other Ministries that they will not communicate at all with the media,” the sources added.

The Ministries have shared their data with the Fund and responded to their questions on the authenticity of data. Power Division has just shared figures of circular debt with the Fund as decision making power lies with the Finance Division or political leadership of the government.

Both the Fund and Power Division are making efforts to contain and minimize circular debt, which is showing substantial growth, the sources said, adding that it is up to the government to decide how much circular debt will remain on the books and how much will be passed on to consumers.

The sources further stated that by September 2022 the flow of circular debt was agreed to be negative but instead it increased by Rs 185 billion whereas in December 2022 as well the flow was to be negative by Rs 157 billion but it grew by Rs 385 billion.

“We are completely off-track and Fund wants us to be on track for which someone has to bear the cost,” the sources added. The Fund has clearly conveyed to the government that it must withdraw subsidy for the five zero-rated sectors projected to have a financial impact of Rs 100 billion. The government is supplying electricity to five zero-rated sectors at Rs 19.99 per unit all-inclusive despite opposition by the Fund.

The sources said, Fund has urged Pakistani authorities to extend subsidy only to vulnerable segments of society through Benazir Income Support fund. Pakistani authorities have assured the Fund that it would determine some mutually acceptable mechanism.

The government is to bridge the gap of Rs 950 billion by imposing new surcharge of over Rs 2.90 per unit through amendments to the NEPRA Act in addition to continuing existing surcharge of Rs 0.43 per unit.

According to sources, a high-level meeting was held in the Prime Minister Office on Monday afternoon, in the light of discussions and demands of the Fund in which concerned Ministries made presentations.

Copyright Business Recorder, 2023


Comments are closed.

Ashiq awan Feb 07, 2023 07:14am
I indos Dr Hussain mohyudin talk in chamber of commerce lahore that govt should make treaties with business communities as long 20 years and give them freehand makings big projects without interference of any government in return they will return imf loans merely
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Ashiq awan Feb 07, 2023 07:23am
I indos Dr Hussain mohyudin talked about foreign loan problems he said govt should make a long term treti with business community for big projects and no interference of changing government suld involve in return business class return foreign loans of Pakistan and it has been done in many countries like corea
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Muhammed Feb 07, 2023 12:08pm
Until & unless T&D losses & Collection losses are trimmed down to bare minimum there isn’t any possibility to come out of Circular debt.
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Owais Feb 07, 2023 08:10pm
Our business community takes huge subsidies makes huge money but never want to pay taxes or good compensation to employee no social security no provident fund no eobi no medical alas this will sure to happen
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