Pakistan’s tariff adjustment plan gets rejected by IMF

The International Monetary Fund has made it more difficult for Pakistan to manage its economy by rejecting any proposal for tariff adjustments or the provision of new subsidies. This occurred despite the authorities’ claims on the bill collection for August, which was close to expectations. Not supporting assertions from the authorities that bill payment for August was on par with expectations.

The tariff issue

According to reports, Pakistan has asked that upcoming quarterly tariff adjustments (QTAs) and Fuel Price Adjustments (FPAs) of PKR 7.50 per unit be staggered over the next four to six months in response to the IMF’s serious objections to the government’s proposal to provide relief to the poor against exorbitant power bills.

Pakistan’s plea

Pakistan is said to have requested the IMF for an astounding QTA and FPA over a period of four to six months, so it may also require some additional cost on which both sides will have to agree. Official sources confirmed this while talking to the media.

The sources claimed that despite the QTA’s instruction to hike rates by PKR 5 per unit in the current month and FPAs by PKR 2.72 per unit, the power sector’s problems have remained. A rate increase of over PKR 7 per unit is anticipated. The QTAs will be determined using losses from the April to June period because of lower unit consumption, cost escalation of interest payments, and exchange rate changes.

Inflation troubles the country

At the beginning of July, Pakistan raised the energy base tariff by PKR 7.5 per unit due to the nation’s economic problems.

According to reports, the National Electric Power Regulatory Authority (NEPRA) granted the federal government permission to increase the base power cost by PKR 4.96 per unit on July 14.

Meanwhile, the caretaker government in Pakistan has already asked the power regulator to begin collecting an additional PKR 5.40 per unit quarterly rate adjustment over six winter months starting in October rather than three months as is now allowed.

The main cause of the current power tariff is the recent depreciation, which accounts for about 70% of it. Because of the IMF program, the government now has no control options. However, the government’s and SBP’s options are limited by the fund program, and an increase of 10–12% is expected because of interest rates.