Imran Khan govt in Pakistan to raise power tariff amid increasing IMF debt

Despite an outcry by its citizens over massive blackout recently, Imran Khan government on Friday has once again planned to raise the power tariffs amid increasing IMF debt.

It will be increasing the power tariff by (Pakistani Rupee) Rs 1.90 per unit to revive the stalled IMF loan programme under the USD 6 billion Extended Fund Facility (EFF), top official sources told The News International.

The government has projected that the circular debt will mount up to Rs 2,805 billion by the end of June 2021, putting the bleeding power sector into a severe cash constraint situation.

The PTI government led by Imran Khan has already hiked the power tariff several times, but it has not helped.

A hike of Rs 3.30 per unit had been agreed on by the government in phases. The first hike of Rs 1.90 per unit is expected to be announced in the next few days, reported The News International.

The multilateral creditors, including the IMF, World Bank and Asian Development Bank, had often suggested increasing power tariffs in the past to fix the problem of circular debt.

The circular debt was persistently raising trends and it might escalate to Rs 2,805 billion by the end of June 2021. It had climbed to Rs 2,150 billion during the last financial year 2019-20, indicating that the bleeding of the power sector surged by Rs 538 billion just in 12 months from July 2019 to June 30, 2020, reported The News International.

This shows that the circular debt went up by Rs 44.8 billion on a monthly basis in the last financial year.

Meanwhile, the Imran government shifted the blame on the COVID-19 pandemic and said that the situation ballooned the circular debt in the second half of the last fiscal year.

The government performance was also exposed as it claimed that the monthly accumulation of circular debt was curtailed at just Rs 10 to 12 billion. However, it proved wrong because senior officials of the power division did not include all the heads while calculating the circular debt, reported The News International.

The amount payable to IPPs is projected to grow from Rs 1,038 billion at the end of June 2020 to Rs 1,711 billion by the end of June 2021. "There is a projection that the circular debt might increase by Rs 499 billion in the financial year 2020-21," said an official.