ISLAMABAD: With an agreement on re-financing a loan of $700 million from China Development Bank (CDB), the IMF has asked Pakistan for slapping a power surcharge of approximately Rs3 per unit on consumers for recovery of piled mark-up on the Power Holding Company.
On the issue of re-financing of commercial loans from Chinese banks, one top official of the government informed The News on Tuesday night that they were hopeful that all Chinese matured loans would be re-financed soon. However, according to official sources, two more commercial loans were expected to be re-financing including $500 million and $800 million. So in totality, Pakistan is eyeing to get re-financing of Chinese loans up to $2 billion by the end of February or the first week of March 2023. But the cash-bleeding power sector still remained a hard nut to crack as so far it has become one of the major stumbling blocs in the way to signing a Staff Level Agreement (SLA) with the IMF. The government will have to make up its mind about slapping another surcharge on the power sector for moving towards striking a much-awaited Staff Level Agreement.
Pakistani authorities and the IMF side held virtual talks on Tuesday evening for moving towards signing of SLA and both sides discussed the possibility of slapping another surcharge but its exact amount could not be firmed up yet. The IMF wants power surcharge of approximately over Rs3 per unit on an immediate basis in the wake of unprecedented losses continuously being experienced by the sector. The IMF has conveyed to Pakistani side that the betterment of the country or this cash bleeding power sector could not run simultaneously with the status quo approach so there was a dire need to undertake much delayed reforms in this sector without wasting time.
The government paid out total accumulated losses of Rs 1600 billion during the last financial year 2021-22 which was even higher than the defence spending shown in the budget documents. This monster of circular debt and losses accumulated in the power sector will result into drowning of the economy of Pakistan.
When contacted, one of the negotiators from the Pakistani side said that “They were still discussing the surcharge issue with the IMF”. There is still confusions within the ranks of the government for resolving this lingering issue which so far found one of the major stumbling blocs in the way for striking a staff level agreement as some quarters of the government are taking stance that efforts should be made through improved revenues or expenditure cuts instead of raising the tariff by imposing another power surcharge. But there is another view within the ranks and profiles of the government that there is a need of revival of the IMF on an immediate basis so the power surcharge should be imposed without wasting time. There is another issue haunting the economic policy makers more forcefully that the IMF does not trust the Ministry of Finance so they wanted to secure guarantees on each and every issue from the PM office that no deviations would be made during the remaining course of the IMF programme.
Now three issues remained outstanding including getting confirmation from all external financing avenues, slapping additional power surcharge and hiking the policy rate under the tough prescriptions given by the IMF for fixing the ailing economy of Pakistan and releasing a $1 billion tranche under the $6.5 billion Extended Fund Facility.