Budget 2021-22: PM’s aide says IMF concerned over no increase in power tariff

• Pakistan is in talks with IMF over stabilisation measures.
• IMF wants govt to hike power tariff to achieve collection target.
• The government is insisting that the focus should be on the target, instead of fixation over the way leading to that target.

 ISLAMABAD: The International Monetary Fund (IMF) has expressed concerns during its talks with the government over no hike in the power tariff and new sources of tax collection, SAPM on Finance and Revenue Dr Waqar Masood Khan said Friday.

A deadlock persisted between the two sides over different issues, including fixation of petroleum levy, FBR’s tax collection target and assessment of elimination of tax exemption, an exact timeframe to hike the power and gas tariffs and autonomy to regulators such as SBP and Nepra with approval of Parliament.

Speaking on Geo News programme ‘Aaj Shahzeb Khanzada Key Saath’ after the PTI government presented its third budget, Dr Khan said that the IMF wanted the PTI government to implement the already agreed-upon measures. “However, the Fund was told that the real focus should be on the target, instead of any fixation over the way leading to that target.”

The SAPM, who is playing a key role in talks, said they would have convinced the IMF had they had enough time before the presentation of the budget.

Dr Khan said it was decided that the power tariff would be increased by Rs4 per unit. The electricity rates had already been hiked by Rs1.95 per unit, and the Fund was asked to delay another increase of Rs1.90 per unit as it would burden the power consumers beyond their capacity.

He said the power tariff had already been hiked by 40% under the IMF programme. “But our argument is that increasing electricity rates, again and again, is no solution to the restoration of the energy sector,” he said.

The PM’s special assistant said the government had given an assurance to the IMF about no increase in the circular debt.

Talks to continue

Dr Khan said talks would continue with the IMF, and there is a short break for the moment.

He said the Fund officials were focused on a board meeting on July 6-7, while the finance authorities in the country were busy in preparation of the budget for the financial year 2021-22.

“Had we sufficient time, we would have reached some conclusion,” Dr Khan said, adding that the IMF was a difficult and hard programme, and the government had to make hard decisions.

He said Pakistan would have financial figures for July and August when the next meeting would take place with the Fund authorities.

He said Pakistan was the country which made the most fiscal adjustment with the IMF during the COVID-19 pandemic.

The special assistant said that the federal government was transferring Rs700 billion more funds to provinces this year.

He said the finance minister had removed hitches in the privatisation of LNG-based power projects, and now privatisation would be carried out in such a manner that the ownership rights of the privatised units would stay with a government department, and the money generated would reach the exchequer as non-tax revenue.