Warns of loan program risk
The International Monetary Fund has rejected the proposal to provide subsidies on electricity bills, warning that such measures could jeopardize Pakistan’s ongoing loan programme.
According to sources, the IMF has taken a firm stance, asserting that neither the central nor provincial governments are authorized to offer subsidies on electricity bills. The IMF specifically raised concerns over the Punjab government’s recent subsidy initiative, which provided a significant relief of PKR 14 per unit for consumers using between 200 to 500 units of electricity.
The IMF has emphasized that subsidies in the energy sector, including electricity and gas, are not permissible under the current agreement with Pakistan. The financial institution has demanded that all such subsidies be withdrawn by September. In response, the Ministry of Finance has issued directives to provincial governments, advising them to refrain from offering untargeted subsidies that could endanger the IMF loan agreement. The Ministry has also clarified that funds allocated for development programs cannot be diverted to subsidize electricity bills.
Sources revealed that during the staff-level agreement with the IMF, provincial governments had committed to adhering to the terms of the deal. The IMF’s latest objection reinforces the need for compliance to ensure the approval of the loan program.
The Punjab government’s subsidy plan had prompted the Sindh government to propose a similar relief measure, which has now been called into question following the IMF’s objection.
