Pakistan hikes power tariffs as part of IMF deal, PM says

As a condition of its IMF deal, Pakistan hikes up its power tariffs, Prime Minister Shehbaz Sharif said on Monday. The move is aimed at reducing the huge public debt in the power and gas sector, which has led to frequent power cuts and liquidity problems.

Sharif said that the tariff increase of up to 5.75 Pakistani rupee ($0.020) per unit would not affect the poor, as 63% of the consumers who use up to 200 units per month would be exempted and another 31% would get a partial subsidy.

He said the IMF demanded the tariff increase as part of the $6 billion loan agreement that was reached last month after eight months of talks. He explained that due to accumulated subsidies and outstanding bills, the power sector has amassed a debt of approximately 2.6 trillion rupees, equivalent to around $9.04 billion. In addition, the gas sector faces its own substantial debt, approximately 1.6 trillion rupees or about $5.56 billion.

“This is a gaping hole that we have to deal with on a war footing,” Sharif said at an event in Islamabad. He further emphasized that theft is a significant issue plaguing the power sector, an issue that needs immediate resolution.

This isn’t the inaugural occasion in recent years where Pakistan has seen a surge in its power tariffs. Earlier this year, it had approved an additional surcharge of 1 rupee per unit for FY 2023-24. The tariff hike is one of the painful measures that Islamabad had to take to meet the IMF’s fiscal targets.

The hike in prices has further escalated the inflationary strain in the country, home to a population of approximately 220 million people. The inflation rate is currently at 29%, after reaching 38% earlier this year.

Leave a comment