The government of Pakistan has promised the International Monetary Fund (IMF) to raise the prices of electricity and gas, while the IMF has demanded an end to subsidies for industries and tube wells.
The IMF has also requested the government to increase gas prices every six months from June 2024 and to take measures to stop electricity theft and improve the transmission system. The IMF has demanded timely notification of the annual rebasing of electricity tariff for 2024-25, revision of power purchase agreements, and reforms in the subsidy of agricultural tube wells. All fertilizer companies have been asked to charge the full gas price.
The government has promised to reduce the difference in gas prices for different areas and industries and has prepared a complete cost recovery plan to prevent revolving debt. The revolving debt in the electricity sector has exceeded 2600 billion rupees. The government has prepared a reform plan to reduce the revolving debt or maintain it at the same level in the financial year 2024-25. The IMF has emphasized the need to meet the target of 2300 billion revolving credit in the power sector by June. The government has also promised to introduce uniform gas prices for cost recovery.
The IMF has stressed the importance of protecting poor households during the adjustment in electricity and gas tariffs. The IMF has provided policy guidelines for the energy sector in the upcoming budget, which include fixing the rates of electricity and gas in time for the next fiscal year while avoiding circular debt.
The IMF has recommended abolishing subsidies for tube wells and industries in the upcoming budget and shifting tube wells to alternative energy. The IMF has warned that Pakistan’s economy will continue to be exposed to risks without energy reforms, and exceeding the budget in the energy sector in the upcoming budget may be dangerous.
