Pakistan's actions towards reducing electricity tariffs fails to get past IMF

Islamabad [Pakistan], March 24 (ANI): A reduction in electricity tariffs, as promised by the government of Pakistan, could not get past the International Monetary Fund (IMF), which is presently holding back a staff-level agreement (SLA) on the first biannual review of the USD 7 billion Extended Fund Facility (EFF), according to a report by Dawn.
This development comes after the IMF had recently turned down Pakistan's request for tax exemptions on foreign investment projects.
As per Dawn, it was widely reported in the media through official leaks that PM Shehbaz Sharif would announce a Rs8 per unit reduction in electricity rates in his speech to the nation on March 23. Sharif, however, did not announce any such relief package in his Pakistan Day speech.
Instead, he presided over a meeting on the power sector. Dawn noted that the meeting was also attended by Awais Leghari, Ahad Cheema, and Muhammad Ali -- the ministers for power, economic affairs, and privatisation, respectively -- PM's special assistant Tauqeer Shah, and other officials reviewed the power sector issues, a statement issued after the meeting said.
The PM Office announced on March 15 that the PM had decided to maintain the petroleum prices at the existing level against up to Rs13 per litre cut worked out by the oil regulator and the petroleum division. It was promised to transfer its financial impact to electricity consumers, Dawn noted.
"A package is being prepared with a comprehensive and effective strategy for power tariff cut," Dawn quoted Pakistan's PM Office which further added, "a big relief package is ready for the consumers through the cushion arising out of changes in international oil prices and other measures".

However, significantly, the tariff package had to be screened by the IMF, which is currently in the process of reviewing Pakistan's economic performance in the first six months of the ongoing fiscal year and outlook for the period ending June 30, 2025, and beyond.
"The purported numbers did not work out in the apolitical software of the IMF," an official told Dawn.
Dawn noted that during the course of the March 4-14 review talks, a plan was shared with the IMF staff mission for around Rs2 per unit tariff reduction on account of some savings through the renegotiation of contracts with the Independent Power Producers.
However as an afterthought, the authorities were tempted to increase the petroleum levy on petrol and diesel by Rs10 to a maximum of Rs70 permissible under the Finance Act 2025 to divert the revenues towards maximising relief in power tariffs.
Dawn noted that this can have another impact of about Rs2-2.50 per unit.
"The IMF should not have an issue given the trade-off, increasing the petroleum levy on oil products and using it for reducing power tariffs. It was revenue neutral, no subsidy or fiscal impact," an official told Dawn.
The development becomes significant as recently the IMF had turned down Pakistan's request for tax exemptions on foreign investment projects, as reported by the Express Tribune.
The Special Investment Facilitation Council (SIFC) had proposed these exemptions during a detailed briefing to an IMF delegation, arguing that such tax relief could boost foreign investment.
However, the IMF maintained its stance on fiscal discipline and turned down the request. (ANI)