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Pakistan likely to face IMF’s anger over delay in gas tariff notification

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1 year ago

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  • Ogra has determined 45% to 50% hike on June 2.
  • IMF to review next loan tranche in Nov this year.
  • As per law, Ogra must notify required raise in tarrif.

ISLAMABAD: Amid failure to notify a hike in gas tariff, Pakistan is likely to face annoyance from the International Monetary Fund (IMF) ahead of its next review under the $3 billion Stand-By Arrangement (SBA).

The Oil and Gas Regulatory Authority (Ogra) had already determined a 45% to 50% hike on June 2 this year, but following the government’s failure, annoyance from the Washington-based lender may become inevitable before it reviews the country’s SBA loan for the next tranche of $1 billion in November this year.

The caretaker setup Islamabad, therefore, is left with no option but to approve the hike by 45% to 50%. Ogra has also sensitised the interim administration regarding the imperative increase in gas prices, ahead of the top Energy Ministry officials told The News.

The country’s gas regulator had last announced a 50% increase in prices (Rs415.11 per MMBTU) for consumers of the Sui Northern Gas Pipeline Limited (SNGPL) bringing the subscribed gas price up to Rs1238.68 per MMBTU. Ogra also hiked prices by 45% (417.23 per MMBTU) for the consumers of Sui Southern Gas Company Limited (SSGCL) for 2023-24.

“The relevant authorities have sensitised caretaker federal minister for energy how imperative an increase in gas prices is. If the government does not take the required action in 40 days after the determination by Ogra, then the regulator must notify the required raise in gas price as per the law amended on the directives of IMF and World Bank.

Now 83 days have elapsed since the determination by Ogra about an increase in gas prices by 45-50%,” the Energy Ministry officials said.

Both the gas companies are facing a shortfall of Rs657.766 billion. The Fund may also take up this very issue any time with the government prior to the review meetings.

The Petroleum Division tailored various scenarios for an increase in gas prices based on political damage control under which low-class consumers would be passed less increase and high-end consumers would be passed on the maximum increase to compensate for the low-end consumers.

However, the former Pakistan Democratic Movement (PDM) government failed to take the decision to this effect and now the responsibility rests with the caretaker setup about an increase in gas tariff.

The SNGPL still has the previous year’s accumulative shortfall of Rs560.378 billion up to FY23, while Sui Southern has a shortfall of Rs97.388 billion and this is how the existing shortfall of both the gas companies stands at Rs657.766 billion.

The IMF wants the government to carve a strategy to end oil and gas sector circular debt which stands at Rs1.7 trillion, out of which gas sector circular debt is at Rs1.3 trillion. The PDM government had submitted a plan to the IMF to manage the gas sector’s circular debt based on the dividends plowing back schemes to reduce Rs543 billion without the consultation of Oil & Gas Development Company (OGDCL).

According to the plan, the federal government would inject around Rs414 billion into the Sui Northern and Sui Southern gas companies through supplementary grants for payment of outstanding dues to gas producers, OGDCL, Pakistan Petroleum Limited (PPL) and Government Holdings (Private) Limited (GHPL).

Out of these funds, the Sui Northern Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL) would clear outstanding liabilities of about Rs225 billion to the OGDCL, Rs62 billion to the PPL and Rs127 billion to the GHPL. On top of these, OGDCL and PPL would arrange about Rs56 billion on their own and partially liquidate some of the investment bonds.

In return, the three gas producers would pay Rs475 billion dividends to the federal government on their retained earnings, estimated to be around Rs1.44 trillion as of June 30, 2022. The government currently holds 100% stakes in GHPL, 85% in OGDCL and 75% in PPL.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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