Mallika Dureja
The International Monetary Fund (IMF) has rejected Pakistan’s revised Circular Debt Management Plan (CDMP) (CDMP). The World Bank has asked the Pakistani government to raise the price of electricity by between PKR 11 and PKR 12.50 per unit to keep the extra subsidy for the current fiscal year to PKR 335 billion.
Circular debt happens when a company that is having trouble getting money doesn’t pay its suppliers and creditors. The IMF says that the revised CDMP is “unrealistic” because it is based on some false assumptions. To stop the power sector from losing money, the Pakistani government will have to change the way it runs things.
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The revised CDMP has called for an increase in the circular debt to the tune of ₹952 billion for the current fiscal year against an earlier projection of ₹1,526 billion. The Pakistan government shared its revised CDMP with the IMF on Wednesday.
The Pakistan government’s revised CDMP showed that they needed an extra subsidy of 675 billion, even though they raised the price of electricity by between PKR 7 per unit in the first two quarters of 2023 and PKR 1.64 per unit in the third quarter from June to August.
During technical level negotiations on 9th review for next tranche, the International Monetary Fund (IMF) has called for Pakistan to declare the assets of government officials of grade 17 and above, as well as those of their families. pic.twitter.com/7YvqUeimWd
— Startup Pakistan (@PakStartup) February 2, 2023
“The IMF has opposed the certain basis of the revised CDMP and asks the government to raise the tariff in the range of ₹11 to ₹12.50 per unit so that the requirement of additional subsidy could be reduced to half from its existing levels of ₹675 billion for the current fiscal year”.
Also, the IMF has asked questions about how the Pakistani government came up with its figure of 675 billion for additional subsidy needs for the current fiscal year. The revised CDMP calls for DISCOs to keep their average losses to 16.27% during the current fiscal year.
According to the report, the Pakistan government has envisaged the target to recover Fuel Price Adjustment (FPA) charges deferred last summer to fetch ₹20 billion against estimates of ₹65 billion made last summer, as per the news report.
