In The IMF deal, Pakistan raises electricity prices by 5.75 PKR per unit to tackle debt and liquidity crisis in the power sector.
Pakistan raises electricity prices and it announced a tariff increase, up to 5.75 PKR per unit, as part of an IMF agreement to tackle unsustainable public debt in the power and gas sector. The hike won’t impact poorer citizens, with 63% of consumers (using up to 200 units) exempt and 31% receiving a partial subsidy. The move comes amid acute liquidity conditions in the power sector, with increasing arrears and frequent outages. The accumulated debts to power generation companies stand at nearly 2.6 trillion PKR, while inflation has surged to 29% in the country.
#Pakistan raises electricity prices under IMF deal: PM Shehbaz Sharif https://t.co/DcS1QVPvda pic.twitter.com/Jpe0WYA8nN
— Hindustan Times (@htTweets) July 24, 2023
Power Sector Woes:
The IMF had raised concerns about the acute liquidity conditions in the power sector, with increasing arrears and frequent power outages. The arrears, a result of subsidies and unpaid bills, were a major point of contention during the eight months of negotiations between the IMF and Islamabad before reaching the deal.
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Debt Crisis:
The accumulated debts to power generation companies stand at nearly 2.6 trillion Pakistani rupees ($9.04 billion), with an additional government debt of around 1.6 trillion rupees ($5.56 billion) to the gas sector. Prime Minister Sharif acknowledged the seriousness of the situation and described it as a “gaping hole” that needs to be urgently addressed.
Inflation Surges of 29%:
To meet the IMF’s fiscal tightening measures, Islamabad had to implement several painful steps, including multiple power tariff increases over the past year. These price rises have contributed to inflation, which has reached 29% in the nation of 220 million people, after reaching a peak of 38% earlier.
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