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The IMF Board has approved the release of four pending assessments of the Pakistani economy and an installment of about ً 500 million under the 6 6 billion loan program.
Despite the current uncertain political situation, Prime Minister Imran Khan has taken some tough political decisions to revive the IMF program, including a significant increase in electricity prices, the imposition of a tax of Rs 140 billion and the State Bank It also included agreeing to give unprecedented autonomy to
A senior government official told the Express Tribune that the IMF executive board ratified the staff-level agreement reached last month between the government of Pakistan and the IMF team. The board’s approval has paved the way for the release of the third tranche of the ڈالر 500 million loan. Out of a total of 6 6 billion, the IMF has already disbursed 1. 1.45 billion in two tranches.
Sources said that it would be very difficult to keep track of the revived IMF program, especially the imposition of heavy taxes of more than Rs 700 billion and austerity measures in the next budget are difficult targets.
Pakistan’s economy began to recover gradually from the effects of the Corona, but is now being hit again by a third wave of deadly epidemics. The central bank last week revised its growth forecast to 3 per cent for the current financial year. With the resumption of this program, the external debt pipelines will remain open for Pakistan.
In April last year, the IMF adjourned the board meeting to approve a second review because the government had not kept its promise to bring in a mini-budget and increase electricity prices, which led to the suspension of the program.
In February this year, the two sides agreed to submit the second, third, fourth and fifth reviews of the program pending. The PTI government has agreed to impose a tax of Rs 140 billion to revive the IMF program.
The return of income tax exemption of Rs 140 billion was a precondition of the IMF. In addition, the government increased electricity prices by 16% in February and promised a further 36% increase in six months (April-October).
The federal cabinet on Friday approved the implementation of an ordinance aimed at paving the way for a legal increase of at least Rs 5.65 per unit in electricity tariffs from October to date to collect Rs 884 billion from consumers.
The Cabinet also approved further amendments to the NEPRA Act through an ordinance. The ordinance will give the government the power to impose a new surcharge of Rs 1.40 per unit. This ordinance will also pave the way for implementation of Circular Debt Management Plan.
Legal amendments have reduced the power of the federal government to increase electricity tariffs and NEPRA has been given this power. The circular debt management plan shows that from now till October, electricity rates will be increased by Rs 5.65 per unit in six phases, thus an additional Rs 884 billion will be collected from power consumers from April 2021 to June 2023. An increase of Rs 5.65 per unit will increase electricity bill plus taxes by 36%.
The six-step increase in electricity prices includes two annual tariff adjustments and four quarterly tariff adjustments. After adding 10% special surcharge, the price will go up to Rs 7 per unit and the additional burden will be Rs 934 billion.
The PTI government has already increased the monthly base tariff by Rs 1.95 per unit last month. After adding this increase, the price of electricity will increase by Rs 8.95 per unit and consumers will be burdened by Rs 1.134 trillion.
