ISLAMABAD: The International Monetary Fund (IMF) has refused to endorse tariff rationalisation for the industrial sector and curtailing the circular debt of the cash-bleeding energy sector and argued that the plan possessed fiscal risk instead of tackling underlying persistent problems.
There is another risk that the Fund might raise objections over the unbundling of PIA as well because the settlement of Rs260 billion would have a cost of Rs32 billion on a per annum basis and there might be Rs16 billion cost attached to restructuring of domestic debt. The IMF has not granted its assent over the settlement of PIA’s domestic loans keeping in view its attached fiscal cost.
In the power sector, the IMF has conveyed to the Pakistan side that the circular debt management plan was not in line with the Fund’s programme. It is essential for the government to focus on broad-based reforms, including reducing the high cost of energy, improving compliance and reducing theft and line losses, ending captive power, and fixing the governance and management of the Discos, as well as keeping up with regular tariff adjustments, added the IMF.
A top official, who was involved in parleys with the IMF, told this scribe that Pakistan utilised the dividends of companies as a source for the settlement of circular debt of the energy sector in the past.
Citing an example, he said that when the PMLN-led government came into power then they settled Rs480 billion circular debt of the power sector but this was done just ahead of joining the IMF programme. When there will be any fiscal cost attached with the clearing of CD plan the IMF would raise objections over it and same was happened in this case.
The IMF asks for tackling the underlying structural problems such as improving energy mix, curtailing leakages and improving collection of bills as well as rationalising tariff in line with recovering the cost of energy in order to make this sector sustainable.