Wednesday June 19, 2024

IMF seeks details as Pakistan mulls relief in electricity bills amid protests

Global lender also questions FBR about its strategy to reduce tax on electricity bills, sources say

By Ashraf Malkham
August 30, 2023
The International Monetary Fund headquarters in Washington, DC, on April 13, 2023. — AFP
The International Monetary Fund headquarters in Washington, DC, on April 13, 2023. — AFP

ISLAMABAD: After the government decided to seek approval from the International Monetary Fund (IMF) about its proposal to provide relief to its furious citizens over a hike in electricity bills, the Washington-based lender has asked Islamabad to submit a written plan, Geo News reported quoting sources.

For the last few days, people across the country have taken to the streets to protest against the exorbitant increase in power bills.

The decision by the government — currently headed by caretaker Prime Minister Anwaar-ul-Haq Kakar — comes after it decided to approach the global lender, seeking its approval before announcing relief measures to the inflation-hit masses. 

A meeting of the federal cabinet was held on Tuesday with the interim premier in the chair to mull options but ended without announcing any measures.

The Power Division shared its proposals with the authorities, but due to strict IMF loan conditions, it was concluded that the lender should be taken on board first.

Islamabad had signed a $3 billion loan agreement with the Fund in July and agreed to stringent financial discipline during the programme.

Under the bailout package, the previous government of the Pakistan Democratic Movement okayed a massive increase in electricity rates which are now being reflected in the bills.

As per the cabinet instructions, Finance Minister Shamshad Akhtar held a virtual meeting with IMF representative Esther Perez and discussed relief measures, the sources said.

They were briefed on the current situation as protests continue unabated across the country.

The Pakistani team submitted various proposals for relief in electricity bills, but the IMF officials sought the relief plan in writing which would be shared with them today, the sources added.

They further said that the officials of the Federal Board of Revenue (FBR) also had virtual contact with the Funds on tax collection in July.

“The two sides will hold another session in the next few days.”

IMF, FBR officials discuss tax collection

As per the sources, the FBR and IMF officials also held talks on the tax collection target for fiscal year 2023-24. 

The FBR chairman and other high-ranking officials briefed the Fund about the details of revenue collection from July this year.

During the meeting, the sources said the reasons behind FBR's failure to achieve its tax collection target and strategy to achieve goals for the current financial year also came under discussion.

The FBR, during the briefing, assured the global lender that it will achieve its current year's target. Another meeting, to be held in September, will include a discussion on receipts for the current financial year.

The IMF asked FBR officials about the expected shortfall in tax revenue if the subsidy is given on electricity bills, the insiders said.

The Lender also inquired whether the subsidy on power bills would be given by reducing taxes on power bill or it will be financed thorugh other sources.

The sources said that another round of talks is expected to take place between IMF officials and Pakistan's economic team.