IMF disappointed with government’s failure to notify revised gas prices

The logo of the International Monetary Fund outside its office in Washington DC - Reuters/File
The logo of the International Monetary Fund outside its office in Washington DC – Reuters/File
  • The IMF has directed the government to review gas tariff prices twice a year.
  • The IMF reported that the PDM government delayed the gas increase for political reasons.
  • The IMF also questioned Ogra as to why the gas tariffs were not notified.

ISLAMABAD: The International Monetary Fund (IMF) has expressed disappointment over the government’s decision not to notify the revised gas price every six months in a financial year – July 1 and January 1. news on Wednesday.

The Fund has directed the government to review gas tariff prices every year to avoid accumulation of circular debt in the gas sector.

“The upcoming IMF mission raised the issue of the government not increasing gas tariffs on a half-yearly basis,” said a senior official who was part of the meeting with the fund. news,

“The Fund argued that the failure to increase gas tariffs twice in the last 10 years since 2013 has led to the huge increase in gas circular debt.”

Pakistani officials told the Fund that the caretaker government has notified an unprecedented increase in gas tariffs with effect from November 1. He also said that the government expected to generate revenue of Rs 980 billion in eight months. Therefore, the government will not need to hike tariffs from January 2024, when the regulator comes up with the determination to be effective from January next calendar year.

The interim government also told the fund that the Shehbaz Sharif-led government has delayed increasing gas tariffs due to political considerations, and the caretaker regime will have to come up with a huge increase, thereby ending the process of further increases. Circular debt in FY24 now stands at Rs 2,900 billion.

The IMF mission held a meeting with Ogra officials on Tuesday and asked the regulator why it has not notified the gas tariff even after 40 days have passed since its determination. The fund was told that the regulator cannot do this work on its own, as under Section 21 of the Act, it will have to take directions from the government.

On Monday, the government informed the IMF that it expects the current account deficit (CAD) to end at $4.5 billion by the end of June 2024, down $2 billion from the projected $6.5 billion.

A report published in news It said on Tuesday that the downward projection of CAD indicates that the government expects imports to continue to decline in the remaining period of the current financial year.

Amid difficulties in bringing the inflow of foreign dollars to the desired level, Pakistani authorities have no other option but to reduce the CAD to avert a balance of payments crisis.

Pakistan’s external financing requirements were $28 billion – external debt service of $23.5 billion and CAD projection of $4.5 billion.

The signing of the IMF agreement on the $3 billion Stand-By Arrangement (SBA) program saw an improvement in foreign exchange reserves through July 2023, but the pace of foreign loans and grants has slowed in the last two months. Now officials hope that the completion of the first review of the IMF program will increase dollar inflows from multilateral and bilateral lenders.

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