IMF asks govt to slap Rs3 per unit power surcharge

IMF wants power surcharge on immediate basis due to unprecedented losses continuously being experienced by the sector

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A representational image of an electricity meter. — Reuters/File
A representational image of an electricity meter. — Reuters/File

  • Govt hopeful all Chinese matured loans would be re-financed soon.
  • Pakistan eyes to get re-financing of Chinese loans up to $2bn by first week of March.
  • Dire need to undertake much-delayed reforms in power sector: IMF.


ISLAMABAD: The International Monetary Fund (IMF) asked Pakistan to swallow another bitter pill by slapping a power surcharge of approximately Rs3 per unit on consumers for recovery of piled markup on the Power Holding Company, The News reported Wednesday. 

A government official, on the issue of re-financing of re-financing a loan of $700 million from China Development Bank (CDB), said that they were hopeful that all Chinese matured loans would be re-financed soon.

However, according to sources, two more commercial loans were expected to be re-financed including $500 million and $800 million. So in totality, Pakistan is eyeing to get re-financing of Chinese loans up to $2 billion by the end of February or the first week of March 2023. However, the cash-bleeding power sector still remained a hard nut to crack as so far it has become one of the major stumbling blocs on the way to signing a staff-level agreement with the IMF

The government will have to make up its mind about slapping another surcharge on the power sector for moving towards striking a much-awaited staff-level agreement (SLA).

Pakistani authorities and the global lender held virtual talks on Tuesday to move towards the signing of SLA and both sides discussed the possibility of slapping another surcharge but its exact amount could not be firmed up yet. The IMF wants a power surcharge of over Rs3 per unit on an immediate basis in the wake of unprecedented losses continuously being experienced by the sector. 

The Fund has conveyed to the Pakistani side that the betterment of the country or this cash-bleeding power sector could not run simultaneously with the status quo approach so there was a dire need to undertake much-delayed reforms in this sector without wasting time.

The government paid out total accumulated losses of Rs1,600 billion during the last financial year 2021-22 which was even higher than the defence spending shown in the budget documents. This monster of circular debt and losses accumulated in the power sector will result in the drowning of the economy of Pakistan.

When contacted, one of the negotiators from the Pakistani side said that “they were still discussing the surcharge issue with the IMF”. There is still confusion within the government for resolving this lingering issue which, so far, has become one of the major stumbling blocs in the way of striking a staff-level agreement as some quarters are taking the stance that efforts should be made through improved revenues or expenditure cuts instead of raising the tariff by imposing another power surcharge. 

However, there is another view within the government that there is a need for the revival of the IMF on an immediate basis so the power surcharge should be imposed without wasting time. There is another issue haunting the economic policymakers more forcefully the IMF does not trust the Ministry of Finance so they wanted to secure guarantees on each and every issue from the PM Office that no deviations would be made during the remaining course of the IMF programme.

Now three issues remained outstanding including getting confirmation from all external financing avenues, slapping additional power surcharges and hiking the policy rate under the tough prescriptions given by the IMF for fixing the ailing economy of Pakistan and releasing a $1 billion tranche under the $6.5 billion Extended Fund Facility.