ISLAMABAD: International Monetary Fund (IMF) has rejected circular debt management plan (CDMP) presented by government and asked authorities to raise electricity tariff by Rs 12.50 per unit in order to restrict additional subsidy at Rs 335 billion for current fiscal year.

During second day of technical-level talks, Washington-based lender termed revised CDMP as “Unrealistic”, which is based on certain wrong assumptions. So government will have to bring more changes in its policy prescription to restrict the losses of cash-bleeding power sector.

IMF and Finance Ministry will work out gap on fiscal front after which different additional taxation measures will be finalised through upcoming mini-budget.

Revised CDMP envisages an increase in monster of circular debt to tune of Rs 952 billion for current fiscal year against an earlier projection of Rs 1,526 billion.

Government shared its revised plan with IMF high-ups, which shows government required an additional subsidy of Rs 675 billion despite raising power tariff in range of Rs 7 per unit through quarterly tariff adjustment in first two quarters of 2023 and Rs 1.64 for third quarter from June to August.

“IMF has opposed certain basis of revised CDMP and asks government to raise tariff in range of Rs 11 to Rs 12.50 per unit so that requirement of additional subsidy could be reduced to half from its existing levels of Rs 675 billion for current fiscal year,” sources confided to publication.

IMF raised questions on how government calculated its additional subsidy requirement figure of Rs 675 billion for current fiscal year. Government has understated exchange rate for calculating revised CDMP, so with existing rate plan would be changed.

Talking to journalists, State Minister for Finance Aisha Ghaus Pasha said that cost of power generation was on higher side while recovery was less, so bottom point was crystal clear that country now could not afford subsidy.

Published in The Daily National Courier, February, 03 2023

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