Big Setback for Pakistan: No consensus with IMF to bail out power sector as economic crisis unfolds

In a fresh setback for Pakistan, the International Monetary Fund (IMF) is yet to agree with the country's roadmap for a loan to bail out its crippled power sector. Pakistan and the IMF could not agree on a roadmap for recouping the power sector which is suffering an average monthly loss of Rs 123 billion. The development comes after Pakistan's finance minister Ishaq Dar held a virtual meeting with IMF mission chief Nathan Porter in a bid to secure the next round of funding from the international lender. 

According to a report by the Express Tribune, the power sector has become the biggest stumbling block in the way of the 9th IMF review mission, which is the prerequisite for the approval of the next loan tranche of over $1.1 billion.

The report said that Pakistan's circular debt increased by Rs 393 billion during the July-September period and it further increased to Rs 500 billion by October end. The discussion between Pakistan and the IMF also included the revenue collection from the petroleum levy, as the Pakistan government has further revised its earlier projection of Rs 800 billion in revenue.

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To convince the IMF, Pakistan even shared a plan to increase the electricity tariff besides advancing quarterly tariff adjustments. However, that also did not work for now as the IMF will first review the proposal and then will share its feedback with the government. 

It may be recalled that the IMF board was supposed to release the 9th review tranche by November 3rd but the same has now been delayed by almost two months. The delay comes due to Pakistani authorities’ failure to meet the programme conditions.

The IMF, whose loan conditions are very stern, has asked Pakistan to share a clear roadmap for the power sector, taxation and issues leading to fiscal imbalances due to three key factors –higher than agreed circular debt during the current fiscal year, higher than agreed primary budget deficit and expenses on flood rehabilitation and reconstruction.