- Finance minister says urgent action needed to curtail circular debt.
- Islamabad hopeful of unlocking forex inflows after IMF review.
- Says IMF to grant approval for second tranche within a month.
ISLAMABAD: It seems there will be no respite for the masses from high electricity and gas tariffs as interim Finance Minister Dr Shamshad Akhtar has said that the caretaker government plans to hike the prices of these utilities in January to curtail the circular debt issue, reported The News on Friday.
Addressing a press conference at the Q Block on Thursday, the federal minister said that under the International Monetary Fund’s (IMF) Stand-By Arrangement (SBA) the government has agreed to cut down the costs in the energy sector and restore efficiency.
“The circular debt of the power and gas sectors has crossed 4% of Gross Domestic Product. Urgent action is needed to bring it down. We have started work in this regard and electricity and gas rates have been adjusted accordingly,” she added.
Sharing more details about her talks with IMF, the finance minister said that she had informed the global lender about tariff revisions in the energy sector and the intention to impose extra taxes on various sectors, including real estate and retailers. However, she clarified that no final decision has been taken as of yet.
“Pakistan requires a fresh short-term IMF programme as the country cannot run without it keeping in view of the fragile macroeconomic stability,” Dr Akhtar said. She added that Islamabad would have to go for another medium-term programme probably under Extended Fund Facility (EFF) once the SBA ends.
On the question of the external financing gap, Finance Secretary Imdad Bosal was hopeful that the successful IMF review would unlock programme and project loans from multilateral lenders, including the World Bank (WB), Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), and Islamic Development Bank (IsDB). He hoped that a reduction in the current account deficit would scale down the external financing requirement.
“There is no gap on the external financing front as processing of the programme loans from WB and ADB as well as co-financing from AIIB were at advanced stages and would now be approved in December this year,” he added.
The secretary added Islamabad was expecting Pakistan’s ratings to improve after the review which would help the government generate the desired dollar inflows in the shape of foreign loans.
The finance minister said the World Bank was expected to disburse $2 billion in loans during the current fiscal year. The foreign exchange reserves, she said, would build up next month after approval for $700 million tranche from the IMF, so the total disbursement would go up to $1.9 billion out of $3 billion under the SBA.
Dr Akhtar said the IMF’s Executive Board is expected to grant approval for the second tranche within a month.
‘Caretaker govt building market confidence’
Meanwhile, speaking at The Future Summit in Karachi, Dr Shamshad Akhtar said the caretaker government has taken a lot of proactive measures to stabilise the economy and build market confidence.
At the core of the government stabilisation efforts is the $3 billion SBA programme approved which led to an initial disbursement of $1.2 billion by the IMF, she added.
While talking about the Special Investment Facilitation Council (SIFC), the finance czar said a transaction pipeline has been established to accelerate investments in critical infrastructure, encompassing projects such as the $10 billion Saudi Aramco Refinery.
“The transaction pipeline also incorporates leasing of 85,000 acres of agricultural corporate farms to potential foreign investors,” she added.
About structural weaknesses of state owned enterprises (SOEs) and reducing the drain on the budget, she said the caretaker government is focused on activating the Centralised Monitoring Unit (CMU), which will monitor the SOEs and publish regular reports on financial performance and contingent liabilities.
“We are in the process of finalising a SOE policy under the SOE law as agreed with the IMF. The focus of policy is on improving governance and financial efficiency of loss-making SOEs,” she said.
