ISLAMABAD - The government has decided to withdraw Rs65 billion subsidy on electricity to meet the conditionalities agreed with the International Monetary Fund (IMF) for its $7.6 billion standby loan. Addressing a Press conference here on Monday, Advisor to the Prime Minister on Finance Shaukat Tarin announced that the subsidy would go by June 30 this year. The government was paying Rs65 billion subsidy on electricity in the current financial year, he said, adding the tax net would be extended to new sectors in the next fiscal budget. The government had resorted to the withdrawal of the said subsidy a few months back when Pakistan Electric Power Company (Pepco) recommended 61 per cent increase in electricity tariff, which had enhanced the total cost of electricity by 31pc. However, the decision had triggered severe protests and the government was forced to enhance the electricity cost by 18pc only. Tarin, however, said the government had so far not decided increase in the electricity tariff, saying that the same would depend on prices of furnace oil at that time. Pakistani and IMF officials had ended nearly two weeks of consultations in Dubai on Thursday last for the first review of $7.6b emergency IMF loan package approved in November last. Pakistan received the first tranche of $3.1b from the IMF in late November and the second tranche of more than $800 million is expected by the end of current month (March). Tarin said Pakistan would negotiate and lobby for enhancing IMF funding quota from existing 5 times to 8 in the IMF executive board meeting to be held in April this year to get additional $4.5b. He said that after successful talks with IMF held in Dubai, Rs60b had been reduced from the tax recovery target, while the GDP had been set at 2.5pc. IMF has been convinced to reduce tax recovery target from Rs1,360b to 1,300b, as it was not possible for Pakistan to achieve the target GDP due to decrease in imports in the current year and other reasons. Tarin said the government would cut down the interest rate in the next few weeks as the inflation was expected to fall sharply. The inflation had been reduced to 20pc from 23pc in a few months back and would be 10pc till June 2009, he added. He said due to government's economic stabilisation programme, the macro-economic indicators were improving and investors were bringing back their investments and capital in Pakistan. He said the economy was improving and the foreign reserves had crossed the figure of $10b. The government saved Rs52b by getting fewer loans from the central bank in the first six months of fiscal year, he said. The fiscal deficit was Rs249b against the target of Rs261b in the first six months, while 2pc increase was witnessed in selling of treasury bills, added the Advisor. Tarin stated that the stability had been witnessed after the establishment of Special Fund for Stock Markets, while the overall dues of the government would be reduced by 50 per cent in the next few months. He said the exports and manufacturing sectors had suffered a lot due to high rate of interest that resultantly widened the trade deficit. He said the IMF officials had concurred with Pakistan on the approach to monetary policy. "We were able to convince them that we obviously are not looking at increasing interest rates or keeping them where they are, as inflation is coming down," Tarin said. "I think we are now looking at reducing rates in the next weeks and months and I think they agreed with us that is the appropriate stance of monetary policy." Tarin said inflation was expected to remain 6 per cent in 2009-10 as compared to the latest forecast, made last week, of 20 per cent for 2008-09, while economic growth would be seen recovering to 4 per cent in 2009-10 from just 2.5 per cent in the current fiscal year. He said when there would be political stability in the country, huge investments in different sectors would come and generate economic activities besides creating jobs. He, however, said that Pakistan's political situation hadn't come under discussion in the IMF review meeting. Agencies agencies: Tarin said the power tariff is likely to be hiked during April-May this year, adding that the tax recovery is being improved through PDL.