The government has approved a massive hike of Rs1.39 per unit in power tariffs from next month. This was the long-standing demand of the IMF for the bailout package and it seems the government has finally caved in before the global financial institution.
The decision comes as Finance Minister Shaukat Tarin is in Washington to revive the stalled IMF loan programme. After assuming responsibility as finance minister, Tarin had vowed that he would not increase electricity prices and would instead convince the IMF to reduce circular debt through other means. The prime minister had also refused to increase electricity prices until January next year.
During his Washington visit, the finance minister said the IMF’s demand to increase power tariff would trigger inflation and this point was placed during various meetings. But the circular debt is pilling and the government needs the funds. Therefore, it has no other choice but to accede to these demands.
NEPRA had earlier increased the power tariff by Rs1.95 per unit on account of the fuel cost adjustment (FCA) for August. Consumers, who are already facing the brunt of inflation, were faced with higher electricity bills this month. The maximum electricity price is proposed at Rs24.33 per unit for domestic consumers and subsidies worth Rs72 billion are being withdrawn.
The revival of the IMF programme is set to trigger a new wave of inflation in the country. The price of cooking oil and ghee was hiked overnight by Rs15 to Rs1775 per five kilograms. The price of fuel is expected to witness another rise this month as global oil prices continue to increase. Pakistan is also facing a gas crisis and has stopped all ongoing and current gas schemes.
The IMF had already demanded levying Rs525 billion additional taxes. The government had shown an inclination to withdraw over Rs300 billion sales tax exemptions. The revival of the loan programme depended on three key demands: an increase in power tariffs, imposing additional taxes and reduction in public sector spending. It seems the government has complacently acceded to these demands without realising its adverse on the masses.
