THERE's good news and bad news. That's what PM's Finance Adviser Shaukat Tarin appeared to say in his recent press conference. Interest rates are going to go down; power rates are going to go up. Though the government, at the time of its agreement with the IMF was adamant in its insistence that there were no conditions, but the Fund has a lot to say in what the government does to the two variables mentioned above. The power rates are going to go up because the government wants to withdraw its subsidies on electricity. The issue of subsidies is sensitive. In the public's mind, there should be no withdrawal; the government would be running away from its essential duty of serving the public. In public finance circles, even those who believe fully in the government's benevolence think the subsidy was unsustainable; that this was money that could have been better spent elsewhere. Where? Specifically in the power sector, the same sum could have been spent on the removal of WAPDA's circular debt. This removal of debt can free up the organisation's fiscal space for maintenance, so that transmission costs can go down. This can in turn, lower power rates, leading to a sustainable decrease in power rates, as opposed to the cheap populism that drives subsidies. Perhaps, moving on, WAPDA can pay up on the huge sum it owes the government of the NWFP in lost hydel profits. The province has been more than understanding. In the rather dire condition it is in, it is spending a disproportionate amount on law and order, leaving less for development work. It needs the money. Now the good news. The IMF is always insistent that recipient governments should raise their discount rates, specifically when there is high inflation. The PM's Adviser says that since inflation is coming down, there is going to be a strong argument for bringing the interest rates down. If the Fund buys this prediction, there must be veracity in the claim about inflation. With interest rates down, the costs of doing business in the country can glide down as well.