Pakistan refuses to accept IMF demands

Fund seeks contract details of Karachi Nuclear Power Plants, raise in gas and power tariffs

ISLAMABAD: Pakistan has refused to accept the IMF’s demands for sharing contract details of China’s financed Karachi Nuclear Power Plants (K-2 and K-3) projects, raising gas tariff by 38 percent and hiking electricity prices through one-off for recovering monster of circular debt, The News has learnt reliably.

In last three review meetings held between Pakistan and the IMF, severe strains gripped during the parleys of policy level talks and even Pakistan’s team led by Finance Minister Ishaq Dar on one occasion had even threatened to boycott the proceedings of the review talks if the IMF continuously demanded of sharing contract details of K-2 and K-3 nuclear power projects being financed by China’s EXIM Bank.

The IMF’s team led by Harald Finger raised the point on eve of 8th review talks under $6.64 billion bailout package that Pakistan should provide contract details of Karachi Nuclear Power Plant (KANUPP-2) and K-3 projects so that the Fund staff could evaluate projects’ commercial viability. “The IMF wants to know how much subsidy the government will have to pay for these projects,” said the official.

However, Finance Minister, refused to share contract details with the IMF by arguing that the commercial viability plan could be discussed with the IMF to prove its financial viability. In the 9th review talks, the IMF had asked Pakistan to impose additional taxes of Rs160 billion in order to achieve its envisaged fiscal deficit of 4.3 percent of GDP during the current fiscal year.

After severe infighting in policy level talks, Pakistani side agreed to impose additional taxes of Rs40 billion. Pakistani side, the sources said, had presented alternative plan to curtail expenditure and bring administrative improvement in the FBR to bridge this gap but for avoiding derailment of IMF programme finally both sides agreed slapping of additional taxes of Rs40 billion on luxury items and hiking duty by 1 percent on imports.

In recently concluded 10th review talks in Dubai, the IMF asked Islamabad to raise gas tariff by 38 percent in order to avoid collapse of gas utility companies.

Again, Pakistan team after exchanging of hot words refused to hike the gas tariff and presented alternative plan to bridge the gap through administrative measures and exploit all other available avenues.

The IMF team also demanded of raising electricity tariff to recover the monster of circular debt which was currently standing at around Rs310 billion. The stocks of Power Holding Company stood at Rs330 billion so total circular debts was in the range of Rs640 billion.

The IMF asks Islamabad’s economic team to recover the circular debt by passing on burden on the consumers. “Your all gains on macroeconomic front will be lost if you do not take required steps now,” one official quoted the IMF bosses as saying during the review meeting.

However, Pakistani team flatly refused to accept this demand but agreed that both the sides would find out other solutions to protect gains on economic fronts. The first rounds of technical level talks were always remained smooth but policy level talks of last three days proved hard from last three review meetings. This time, Pakistani team was quite confident that this review would remain quite smooth as the country achieved all the five performance criteria for end December 2015 under Extended Fund Facility (EFF) programme.

But it was shocking for Pakistani team when the IMF demanded of raising gas and power tariff in a big way. On this demand, Pakistani side flatly refused to accept these demands in loud and clear manner.