Pakistan Commits to IMF: No New Fuel or Cross Subsidies
The Pakistani government has assured the International Monetary Fund (IMF) of its commitment that there would be no new fuel subsidies or cross-subsidy schemes.
According to a news report, the circular debt (CD) stock, a longstanding issue in Pakistan’s energy sector, stabilized in late 2023 and early 2024 attributed to efforts to align energy tariffs with costs and implement anti-theft measures, particularly in the power sector.
Despite challenges such as lower-than-expected recoveries following tariff rebasing, the government managed to keep the power CD relatively flat at Rs 2.6 trillion. Significant gas tariff increases were implemented in February 2024, with measures to protect vulnerable consumers and equalize prices for industries.
To meet fiscal targets and prevent further CD accumulation, timely tariff adjustments and continued anti-theft efforts are deemed crucial. Structural reforms, including improving transmission infrastructure, enhancing DISCO performance, and reforming power purchase agreements, are also highlighted.
The IMF stressed on regular energy tariff adjustments and broader reforms. While Pakistan’s progressive tariff structure currently.
This involves enhancing transmission infrastructure, improving DISCO performance through privatization or management concessions, shifting captive power demand to the grid, and restructuring debt arrangements.
