edited by: Oindrila Mukherjee
Last Update: March 01, 2023, 20:58 IST
Last month, Pakistan PM Shehbaz Sharif had said that the economic challenge is unimaginable but it is imperative to meet the IMF conditions. (Image: PTI/File)
The Pakistani government has increased the power tariff for the export industry by Rs 12.13 per unit to implement the conditions laid down by the IMF.
Cash-strapped Pakistan on Wednesday withdrew power and gas subsidies to revive a $7 billion aid package under pressure from the International Monetary Fund amid a worsening economic and political crisis.
As per information available, the government has increased the power tariff for the export industry by Rs 12.13 per unit to implement the conditions laid down by the global funding agency.
According to a notification, the government abolished power subsidy to the export industry at Rs 19.99 per unit. The Electricity Department has written a letter to K-Electric and other power distribution companies for the implementation of this decision.
The government has already agreed to raise electricity and gas prices as Pakistan and the IMF move closer to the revival of the $7 billion Extended Fund Facility (EFF), which has been stalled for months.
The IMF has taken four prior actions to close the $7 billion external financing gap, including:
- Levy of fixed electricity surcharge of Rs 3.39 per unit plus 0.43 paise (total Rs 3.82 per unit)
- market based exchange rate
- Increase in discount rate from 150 to 250 basis points
- Securing confirmation from bilateral partners.
On Tuesday, Moody’s Investors Service downgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings from Caa1 to Caa3, noting its “increasingly fragile liquidity and an external situation that significantly increases default risk”. .
The rating agency said the government is implementing some tax measures to meet the conditions of the IMF program and a disbursement could help meet the country’s immediate needs.
It added, “Weak governance and heightened social risks impede Pakistan’s ability to consistently implement policies that secure large amounts of financing and decisively reduce balance of payments risks.”
Dangerous situation
According to media reports, the government has instructed the Accountant General to stop the withdrawal of bills including salaries. Difficulties were faced in operating cost release mainly due to the ongoing economic crisis.
Finance Minister Ishaq Dar, while meeting with a delegation of Rothschild & Co on 22 February, said “the government is steering the economy towards stability and growth”. He added that “the government is committed to fulfilling the IMF program and meeting all international obligations”.
Even though Pakistan is facing a wave of problems on many fronts, its mounting debt can no longer be ignored as inflation rises and foreign exchange depreciates. The country was badly hit by catastrophic flooding that submerged a third of the country, displaced over 33 million and caused economic losses of $12.5 billion to the country’s already faltering economy. Last year, 1,739 people had died in the devastating floods.
Last month, Pakistan’s Prime Minister Shehbaz Sharif said the IMF was giving the government a “difficult time” during talks for loan reinstatement. He said that the economic challenge is unimaginable, and that the IMF’s conditions were “beyond imagination”, but that they must be met.
read all Breaking News Here