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Friday July 11, 2025

BISP data to be used for power subsidy

By Mehtab Haider
July 18, 2020

ISLAMABAD: Pakistan will have to share with the IMF a tangible plan for mobilisation of tax revenues, hiking the power tariff and eliminating circular debt besides proposing amendments to the State Bank of Pakistan (SBP) and Nepra Acts in order to put the stalled programme back on the track.

Top finance ministry officials, in background discussions with a select group of reporters, disclosed that the government would introduce a rationalized mechanism for provision of power sector subsidies where the Ehsaas programme data would be used to identify the beneficiaries. The power subsidy obtained through tube-wells will be abandoned.

The cost of power sector subsidies, he said, had reduced 60 percent in the budget 2020-21 so targeted subsidies mechanism would be introduced. He said the landlords established tube-wells and were obtaining subsidies.

There is also no justification for the influential people to get subsidy on 300 initial units. There are different options under considerationaimed at eliminating subsidy for wealthy and influential segments of the society.

The Ministry of Finance has given a timeframe of six months to the Military Accounts for bringing all pensioners from the manual to direct credit system (DCS). All pensioners have not been converted from manual to DCS so far raising apprehensions that ghost pensioners still existed in the system.

The military accountant general has indicated that they were launching a pilot project at Kasur and later it would be replicated in all regiments. The official said it was the PM and his economic team who decided to give no raise in salaries and pension including for the personnel of armed forces but there was no appreciation for taking such tough and difficult decisions.

The top most official of the finance ministry dispelled this impression that “trust deficit” existed with the IMF arguing that there was complete understanding with the Fund and this transitory phase of ‘deviation’ from the IMF programme in the post-COVID-19 pandemic would be a short-term phenomena so Islamabad would remain in the IMF programme.

He said Pakistan would strive to bring all multilateral donors, including the IMF, World Bank and Asian Development Bank, on one page on the roadmap for mobilization of tax revenues and adopt a strategy, fixing power sector problems and course for eliminating the monster of circular debt.

He said the country possessed a noisy democracy and its governance structure was quite complex and difficult but the government was making efforts to run the economy on the basis of transparency and fair play. However, top officials conceded that there were areas where the government made slow progress such as fixing the problem of cash-bleeding state-owned enterprises and bringing reforms in the FBR.

Without sharing any exact timeframe for reviving the stalled $6 billion IMF program, top officials of finance ministry said the government would have to come up with a revenue mobilization plan, fixing power sector pricing mechanism, a tangible plan to overcome the monster of circular debt that had peaked to Rs2.2 trillion after outbreak of COVID-19 pandemic.

The SBP and Nepra Acts will have to be amended with the approval of Parliament to grant autonomy to these two regulators. Through Nepra proposed amendments, the IMF wants to grant power for determination of tariff with automatic adjustment of power tariff without seeking approval of government. The government will have to indicate how much subsidy it intends to provide otherwise the tariff will be automatically adjusted.

The official said that rationalization of subsidy for the power sector would be finalized as an exact mechanism would be unveiled within next 10 to 15 days. The official said the PM had approved tariff raise for K-Electric on hold but no specific timeframe was finalized. It was discussed that the tariff should not be hiked for two months as power outages were at peak in Karachi.

He said politically tough decisions were required to fix the economy and revive the IMF programme. About Roosevelt, he said the hotel was 100 years old and its renovation required a potential investment of $1 billion to convert it into a multipurpose building.

If this hotel was privatized, it could result into utilizing 40 percent amounts into clearing its liabilities and meeting procedural requirement, he added. So, the option left was joint venture because the piece of land in USA was quite expansive.

The official said the budget deficit would be curtailed at 9.5 to 9.6 percent of GDP for the last fiscal year 2019-20 that ended on June 30, 2020.

Although, the fiscal accounts were not finalized yet, the budget deficit would not escalate to go into double digit anymore and would be restricted. He said the Rs1.24 trillion stimulus package resulted into hiking the budget deficit as the finance ministry had managed to keep the deficit at 5.2 percent of GDP on the basis of its 9-month performance.

However, he said, realities on the economic front after the outbreak of coronavirus had changed altogether so they had to let spending spree to ward off the negative impacts of COVID-19 pandemic.