Friday December 08, 2023

Bound to increase electricity prices: Miftah

We will not breach the IMF agreement as it was done by the PTI government, says Miftah Ismail

July 21, 2022
Bound to increase electricity prices: Miftah

ISLAMABAD: Ruling out the possibility of breaching the IMF agreement, Minister for Finance Miftah Ismail on Wednesday shared an ambitious plan to generate $11 billion, including sale of two RLNG-based power plants to a friendly country.

Addressing a news conference here on Wednesday, Federal Minister for Finance Miftah Ismail declared: “We will not breach the IMF agreement as it was done by the PTI government by violating the Fund agreement in last February 2022 through provision of unfunded subsidies. We will implement each and every prior action agreed with the IMF, including collection of Petroleum Levy. We will raise external financing of over $11 billion through friendly countries by selling out RLNG-based power plants to one friendly country through government to government (G2G) transaction.”

While sharing his ambitious plan, he said that the government would generate $11 billion with the help of friendly countries through transfer of Special Drawing Rights (SDRs), cash deposits, oil and gas import on deferred payments and government to government (G2G) transactions. He hinted that announcement from one friendly country might be done during Prime Minister Shehbaz Sharif’s visit.

The government, he said, will sell two RLNG power plants to one friendly country for fetching $2 to $3 billion. Without mentioning the name of friendly countries, the minister said that when he visited one friendly country and talked about cash deposits, its finance minister offered shifting of SDRs and the IMF knew about it. The transfer of SDRs, he said, would be done in December 2022.

The minister conceded that the rising inflation had eroded purchasing power of the middle class and their miseries increased. He said that the government protected vulnerable and poor segments and added that he did not have sufficient resources to protect the middle-income earners from rising inflationary pressures. There was no choice available to the government to protect the middle class and if the subsidies on fuel and electricity continued just like on the pattern of Sri Lanka, then no one could save Pakistan from plunging into default and bankruptcy.

He said he was not happy to be remembered as the person who hiked the POL and electricity prices but he chose to do it because he wanted to avert a default like situation. He made it clear that Pakistan and Sri Lanka were both poor countries and both were facing a difficult situation in November 2021. The Sri Lankan government did not increase the POL prices and now they were buying Rs3,000 per litre petrol while standing 10 days in a queue.

The women were forced to buy cooking fuel LPG at much higher rates. However, Pakistan raised the fuel prices and averted default.

The inflation, he said, had gone up making lives of middle-income earners difficult but there was no other choice available to the government. He said that the import bill had climbed to $80 billion in the last fiscal year while exports stood at $31 billion, so increased imports jumped up dollar demands. He said that the government and SBP took different measures to compress imports and it would start decreasing from July 2022. He said that the prices of POL products and commodities were coming down in international market, so it was hoped that inflation would start receding in two to three months period.

When Minister for Finance Miftah Ismail was asked about the ineffective role of the central bank in the massive free fall of the rupee against the dollar, the minister replied that the SBP took actions within the available space and he knew that the central bank had taken all possible measures to control the exchange rate. The minister said that the real effective exchange rate should be less than the existing rupee-dollar parity. However, the exchange rate would normalise when the dollar inflows would be improved.

On the occasion, the journalists repeatedly asked questions about provision of Executive Allowance for top bureaucrats which many termed as highly discriminatory but the minister did not reply to the questions.