Pakistan and the IMF Remain polar opposites as the debt in the power sector increases
ISLAMABAD: Pakistan and the International Monetary Fund (IMF) on Thursday could not agree on a roadmap for recouping on an average monthly Rs123 billion power sector losses that are further ballooning highly unsustainable circular debt.
Finance Minister Ishaq Dar held a virtual meeting with the IMF mission chief, Nathan Porter, aimed at finding a common ground to address the power sector issues, according to sources. 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 government added Rs393 billion into the circular debt during July-September period, which further increased to nearly Rs500 billion by end October, according to the documents and the government sources.
The discussions also took place on the revenue collection from the petroleum levy, as the government has now further downward revised its earlier revised projection of Rs800 billion collections.
The meeting remained inconclusive and the Ministry of Finance did not issue a press statement, departing from its earlier practice.
The Pakistani side shared a plan with the IMF that talked about increasing electricity prices on account of interest cost on the stock of the circular debt and advance quarterly tariff adjustments, the sources said.
The plan also included the resolution of the K-Electric outstanding dues and the agriculture-tube wells subsidy.
The IMF will review the plan and then give its feedback, said a government official. He said that both sides have agreed to remain engaged.
As per the revised schedule, the IMF board was supposed to approve the 9th review and release of the tranche by November 3rd. However, due to Pakistani authorities’ failure to meet the programme conditions for the 9th review, the global lender has not yet dispatched a mission to Pakistan.
The IMF is seeking a clear roadmap for the power sector, taxation and addressing any 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, according to the sources.
The meeting ended inconclusive the day the State Bank of Pakistan reported that Pakistan’s gross official foreign exchange reserves dipped to the further lowest level of mere $6.1 billion -remaining at nearly nine years lowest level. The same day, the Standard & Poor’s credit rating agency downgraded Pakistan to ccc+, the lowest rating by the global agency since December 2008.