In a significant development, the International Monetary Fund (IMF) has reportedly urged Pakistan to raise gas tariffs, escalating economic tensions. The proposed gas price hike, if implemented, could soar up to 41 percent by mid-February, according to credible sources.
The IMF, maintaining a stern stance, has refused to provide subsidies on power tariffs, with exceptions limited to those already allocated in the budget. The financial body has recommended cash allocations for various sectors, including Rs 1000 billion for the petroleum sector, Rs 250 billion for power, Rs 600 billion for OGDCL, and Rs 150 billion for PPL.
In response to the IMF’s pressure, Pakistan presented an electricity tariff plan for the export sector, aiming to lower the power tariff from 14 cents to 9 cents. However, this proposal is pending IMF approval, and tensions arise as the IMF had previously rejected a similar decision.
Pakistan’s export sector, advocating for reduced power tariffs to boost exports, faces a complex negotiation dynamic with the IMF. The global financial institution has revised down Pakistan’s growth estimate for fiscal year 2024 to two percent, marking a 0.5 percent reduction from the October outlook, as reported in the World Economic Outlook (WEO).
The economic implications of the IMF’s conditions, including demands for gas and power tariff adjustments, underscore the challenges Pakistan confronts in meeting international lender expectations. The refusal to provide additional power tariff subsidies points to potential budgetary impacts and fiscal challenges in the foreseeable future.
Negotiations between Pakistan and the IMF are ongoing, focusing on critical economic measures and fiscal reforms. The IMF’s insistence on tariff adjustments signals its expectation for substantial policy reforms, further shaping the trajectory of Pakistan’s economic landscape. As the nation grapples with ongoing economic challenges, these negotiations hold a pivotal role in determining the path ahead.
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