IMF rejects Electricity Subsidy plan of Caretaker Government

September 5, 2023

In the face of the IMF’s serious reservations about the government’s proposal to alleviate the burden of inflated power bills on the poor, Pakistan has formally requested the global lender’s permission to spread out the forthcoming quarterly tariff adjustments (QTAs) and Fuel Price Adjustments (FPAs) of Rs7.50 per unit over the next four to six months.

The IMF has firmly rejected the possibility of any further tariff adjustments or the provision of additional subsidies, despite the government’s assertion that bill collections for August were nearly in line with expectations. According to official sources, challenges persist in the power sector, necessitating an increase in tariffs by approximately Rs5 per unit for the current month due to QTAs and an additional Rs2.72 per unit for FPAs. Altogether, there is a potential tariff hike of over Rs7 per unit in the pipeline.

The calculation for QTAs will be based on losses incurred during the April-June period, which were the result of reduced unit consumption, increased interest payments, and fluctuations in exchange rates.

The FPA, on the other hand, accounts for the rise in prices of imported fuel. In total, a Rs7.50 per unit price increase is anticipated to be incorporated into the September bills, pending approval from the regulatory authority.