Business

IMF frustrated over govt’s failure to notify revised gas price

Published

11 months ago

Farwa

IMF has directed govt to review gas tariff prices biannually.
PDM govt delayed gas hike due to political reasons, IMF told.
IMF also questions Ogra on why gas tariffs were not notified.

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

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

“The visiting IMF mission flagged the issue of not increasing the gas tariff on a biannual basis by government,” a senior official who was part of the meeting with the Fund told The News.

“The Fund argued failure to hike the gas tariff biannually for the last 10 years since 2013 caused a massive buildup in the gas circular debt.”

The Pakistani officials told the Fund that the caretaker government had notified the unprecedented hike in gas tariff from November 1. They also explained that the government was hoping it would generate Rs980 billion in revenue in eight months. So, the government may not be required to hike the tariff due from January 2024 when the regulator comes up with a determination to be effective from January next calendar year.

The interim government also communicated to the Fund that the Shehbaz Sharif-led government had delayed the increase in gas tariff because of political considerations, and the caretaker regime has to come up with a massive increase, which will end the process of further increase in the circular debt in FY24 that now stands at Rs2,900 billion.

The IMF mission Tuesday also held a meeting with Ogra officials and asked the regulator why it has not notified the gas tariffs after the lapse of 40 days since its determination. The Fund was told the regulator cannot do it on its own, as under Section 21 of the law, it has to seek guidelines from the government.

On Monday, the government informed the IMF that it expects the Current Account Deficit (CAD) to decline by $2 billion to end at $4.5 billion compared to the $6.5 billion projected till the end of June 2024.

A report published in The News on Tuesday stated that the downward projection of CAD indicated that the government was expecting that imports would continue to decline in the remaining period of the current fiscal year.

Amid difficulties in materialising the external dollar inflows up to the desired mark, the Pakistani authorities have no other option but to reduce the CAD to avert a balance of payment crisis.

Pakistan’s external financing requirements stood at $28 billion — foreign debt servicing of $23.5 billion and CAD projection of $4.5 billion.

After the signing of the IMF agreement under the $3 billion Stand-by Arrangement (SBA) programme, the forex reserves saw an improvement in July 2023, but in the last two months, the pace of external loans and grants has slowed down. Now the authorities are expecting that completion of the first review of the IMF programme would push up the dollar inflows from multilateral and bilateral creditors.

Business

Gold prices in Pakistan approach an all-time high.

Published

21 hours ago

Farwa

Following a substantial surge the prior day, gold prices in Pakistan are ascending to unprecedented levels with an additional gain on Thursday, coinciding with a rise in global precious metal rates.

The price of 24-karat gold in the local market rose by Rs700 per tola, reaching Rs277,900, as reported by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).

Likewise, the cost of 10 grams of 24-karat gold increased by Rs600, currently priced at Rs238,254.

Globally, gold prices exhibited an upward trend, increasing by $7 throughout the day. The APGJSA reports that the international gold price was $2,682 per ounce.

Notwithstanding the increase in gold prices, the silver market exhibited stability, with the price of silver maintained at Rs3,050 per tola.

In the previous month, gold prices in Pakistan reached an unprecedented high of Rs 277,000 a tola, driven by substantial gains in the worldwide market.

Business

World Bank: Power industry subsidies soar by 400% in just five years.

Published

21 hours ago

Farwa

Ninety-four percent of domestic customers will benefit from the budgetary subsidy in 2024, according to a World Bank report, which credits the increase in protected consumers with contributing to the weight of subsidies.

In the current fiscal year, the electricity sector subsidy has increased by an astounding Rs. 954 billion, from Rs. 236 billion in the 2020 fiscal year to Rs. 1190 billion.

Notwithstanding changes, the circular debt has averaged Rs. 400 billion yearly over the last four years due to the incapacity to minimize losses and inadequate recovery of electricity payments.

According to the World Bank, the government must solve the fundamental problems in the power industry in order to lower the burden of subsidies and circular debt, as rising electricity prices and inadequate tax collection will only serve to worsen the circular debt crisis.

The rise in Pakistan’s power sector circular debt has raised worries from the World Bank (WB) despite an unprecedented increase in energy pricing.

Within the last six years, the debt has grown by 1241 billion rupees, according to the World Bank’s study. Between 2019 and 2021, the debt climbed by 1128 billion rupees.

The electricity sector’s circular debt has been increasing at an alarming rate, according to a World Bank analysis. Between 2022 and 2024, there was a substantial increase of 113 billion rupees.

Pakistan’s electricity industry has 2393 billion rupees in total circular debt as of 2024.

Restructuring is required to solve the circular debt issue, according to the World Bank.

Business

Final settlement: Govt to pay five IPPs Rs 72 billion.

Published

22 hours ago

Farwa

On October 10, Prime Minister (PM) Shehbaz Sharif declared that the agreements with five IPPS would be terminated in the first phase. Sources claim that the government will give Rs 15.5 billion to Rousch Power and Rs 36.5 billion to Hubco.

In a same vein, the federal government would pay Lalpir Power Rs 12.8 billion, Atlas Power Rs 15.5 billion, and Sapphire Power Rs 6 billion.

The sources state that late payment fees are not included in the settlement. With effect from October 1, the agreements with the five IPPs will be considered officially ended.

PM Shehbaz earlier remarked that the termination was carried out with the owners of the IPPs’ mutual permission while presiding over the federal cabinet meeting in Islamabad.

The Prime Minister notified the Cabinet that the only money that will be paid, interest-free, to these IPPs is the outstanding balance.

According to him, the national exchequer will gain over 411 billion rupees from the termination of these contracts, while power customers will save roughly sixty billion rupees.

According to Prime Minister Shehbaz Sharif, it was the result of the arduous teamwork of the entire government. In this regard, he also acknowledged the contributions and assistance of the associated parties. He specifically mentioned General Asim Munir, the Chief of Army Staff, who showed a personal interest in the situation.

The prime minister characterized the development as the start of a trip that will ultimately lead to the advancement and prosperity of the populace.

PM Shehbaz Sharif also brought up the assistance that the Punjabi and Federal governments gave to power users over the summer.