Pakistan to raise power, gas tariffs another 12% on IMF demand

[Naveed Yaseen]

By Mehtab Haider
ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have agreed to raise electricity and gas tariffs from January 2010 in the range of over 12 per cent and 10-12 per cent, respectively. It has also been decided to implement monthly fuel adjustments on account of power tariff for restricting the subsidy amount in the range of Rs 55 billion for 2009-10.

The IMF also has raised its concern over the possibility of inflationary rebound risks, which forced Islamabad’s economic managers to revise the upward inflationary target to the level of 11 per cent against the earlier envisaged annual target of 9 per cent. Now there will be no possibility for decreasing the discount rates from 13 per cent during the ongoing month when the central bank will unveil its monetary policy.

On the issue of the GDP growth target, both sides had divergent views but they finally agreed upon putting the annual GDP growth target in the range of 2-3 per cent for the ongoing fiscal year.

However, a senior official at the Finance Ministry told The News on Friday that there was a difference of opinion among Pakistan, the World Bank, the Asian Development Bank and the IMF over the exact calculation for restricting the power sector subsidy in the range of Rs 55 billion.

“Pepco’s calculation needs to be rechecked for reaching at the final figure required for exactly raising the power tariff in coming January, April and August 2010,” said the official. The WB calculation estimates that Pakistan will have to raise power tariff in the range of 31-36 per cent at least in the next three phases starting from January 2010, then in coming April and August.

“We tried our level best to convince the multilateral creditors that raising the power tariff on quarterly basis and adjusting fuel cost on monthly basis will enable Pakistan to manage the subsidy amount within the desired limit of Rs 55 billion,” said the official but conceded that the calculation done by the WB would force Pakistan to raise the power tariff in the range of 31-36 per cent till August 2010, of which Pakistan had already raised the power tariff by 4.4 per cent on October 1, 2009.

Till now, the monthly fuel adjustment was not causing pain in the wake of decreasing trend in the prices of POL products in the international market but now the fuel adjustment would also cause slight hike in power tariff on monthly basis. On the issue of hiking the gas tariff, the official said that the increase in this regard would be made in January and July 2010.

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