Pakistan has accepted another pre-condition of the International Monetary Fund (IMF) for the revival of $7 billion Extended Fund Facility (EFF) as the government agreed to increase electricity rates for consumers of K-Electric (KE).
The federal government has decided to apply uniform tariff for consumers of K-Electric (KE) as Pakistan eyeing to revive $7 billion Extended Fund Facility (EFF) stalled for months.
According to documents, the implementation of uniform tariff will increase electricity rates by an average of Rs3.21 per unit.
The residential consumers using over 100 will be charged Rs1.49 per unit and those consuming 700 units will pay Rs3.21 per unit. Meanwhile, the power tariff for temporary residential customers and industrialists will be increased by Rs4.45 per unit.
The government has also decided to increase electricity rates by Rs1.55 for consumers on a quarterly basis. It has also been decided to increase the quarterly rate of customers from July 2022 to September 2022.
Moreover, the government would also increase the quarterly rates for consumers from March 2023 to May 2023.
Earlier in the day, it was reported that the federal government raised the power tariff for agricultural consumers and withdrew the subsidy under the Kissan package to meet International Monetary Fund (IMF) terms.
The subsidy given to agricultural consumers of Rs 3.60 per unit under the Kissan Package has been withdrawn. Agricultural consumers now have to pay Rs 16.60 per unit for power tariffs.
The International Monetary Fund (IMF) had asked Pakistan to implement demands before reaching a staff-level agreement for the revival $7 billion Extended Fund Facility (EFF) stalled for months.
Pakistan and International Monetary Fund (IMF) are expected to make progress on the revival of the loan programme as their virtual talks for staff-level agreement would be held on March 2.
However, sources told that the Fund has asked the incumbent government to implement demands before reaching a staff-level agreement. Pakistan was facing a ‘tense situation’ like 1998 to revive the stalled programme, they claimed.
IMF statement
Meanwhile, the International Monetary Fund (IMF) issued an official statement following the conclusion of the 9th review talks on the stalled loan program.
IMF mission chief Nathan Porter, in a statement, said that the timely and decisive implementation of policy measures along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development.
The statement, issued after the mission concluded its 10-day Pakistan visit, welcomed Prime Minister Shehbaz Sharif’s commitment to implement policies that are required to “safeguard macroeconomic stability”. He also thanked the leadsfor the “constructive discussions”.
The IMF chief noted “considerable progress” was made during the talks with Pakistani officials on “policy measures to address domestic and external imbalances”.
The IMF mission chief said that the “virtual discussions” will continue between the two sides in the coming days to finalise the “implementation details” of the policies.
‘Tough conditions’
International Monetary Fund (IMF) has asked Pakistan to impose roughly Rs600-800 billion in additional taxes in the second round of talks to revive $7 billion Extended Fund Facility (EFF).
During the meeting, the Fund set tough conditions for additional measures that included imposing roughly Rs600-800 billion in additional taxes.
Sources told that Pakistan was willing to impose taxes to the tune of Rs200 billion through a ‘mini-budget’, while the Fund pressed Islamabad to foist over Rs600 billion additional taxes.
The lender also demanded the government increase tax collection to 1 percent of Gross Domestic Product (GDP). Sources claimed that the Fund demanded the government fix next fiscal year’s tax collection target at Rs8.3 billion.
Sources further claimed that the IMF also demanded to end phase-wise incentives of sales tax. It also demanded to increase sales tax on petrol from 11 percent to 17 percent, sources said, adding that Fund demanded to end Rs110 billion relief granted to textiles and other industries.