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IMF wants govt to pass on Rs65bn burden to power consumers

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  • Government has agreed with IMF that Rs55 billion would be passed on to consumers. 
  • Remaining Rs10 billion would be absorbed through subsidy.
  • Pakistan’s cash-bleeding power sector is moving rapidly towards bankruptcy.

ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan to pass on Rs65 billion to consumers of electricity which has been deferred in the shape of Fuel Price Adjustments (FPA) during the peak of last summer season.

Out of the total outstanding amount of Rs65 billion on account of deferment of FPA in the electricity bills in the current fiscal year, the government has agreed with the IMF that Rs55 billion would be passed on to consumers and that would be recovered through bills. The remaining Rs10 billion would be absorbed through the allocation of subsidy amount.

In a grim situation, Pakistan’s cash-bleeding power sector is moving rapidly towards bankruptcy, as its total accumulated losses might climb up to Rs1,734 billion for the current fiscal year with the adoption of a status quo approach. 

On the other hand, the consumers consider themselves voiceless because the word reform means hiking of tariffs, but actually it results in jumping theft in this sector.

Out of the total accumulated losses of Rs1,700 to Rs1,800 billion, there is a possibility of a subsidy of Rs1,000 billion and around Rs700 to 800 billion piling up in the monster of circular debt if no remedial measures are taken by the government.

Now, the multilateral creditors, including IMF/World Bank, are asking the government to come up with plans to finance the un-budgeted subsidies, including the K-Electric subsidy for which the Ministry of Finance allocated Rs26 billion against revised projections of Rs162 billion, surfacing a gap of Rs136 billion where no amount was available to bridge this gap.

The same scenario prevailed for the Zero Rating Industry (ZRI) and Kissan Package for which the government did not make subsidy allocations of Rs118 billion and Rs28 billion respectively in the current fiscal year.

The IMF also raised concerns over the failure to receive a deferred payment of bills on account of Fuel Price Adjustment, which is estimated to cost Rs65 billion. The bill recovery was reduced from the original target of 93.58% to 92%, creating a gap of Rs55 billion in the current fiscal year. 

The theft of electricity target is also missed as the Transmission and Distribution (T&D) losses target was revised upward from 15.83% to 16.27%, which would result in a deficit of Rs31 billion.

The generation cost recovery is going to cause a financial loss of Rs63 billion. Rs24 billion for May-23 and Jun-23 FCA and Rs39 billion for Q3 & Q4 FY-23 Quarterly Tariff Adjustment (QTA) would be recovered in FY-24.

The hike in markup in recent months also jumped up liabilities of the power sector as the markup on IPPs and Power Holding Company increased from Rs185 billion to Rs249 billion, registering an increase of Rs64 billion.

The K-Electric resolution of subsidy will cause an additional burden of Rs136 billion for which the Finance Division did not make any budgetary allocation in the budget.

In the wake of less demand for power from 45 billion units to 40 billion units in the first quarter of the current fiscal year, the revenues dropped from Rs493 billion to Rs347 billion, registering a loss of Rs55 billion. The non-recovered GST paid to FBR is projected to cause a loss of Rs91 billion in the current fiscal year.

Now, it is expected there will be a possibility of generating financial losses in the range of Rs700 to Rs800 billion accumulating into the form of circular debt in the current fiscal year if the government did not hike the tariffs, bring efficiency and improve governance in cash-bleeding power sector.

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The amount of trade between Saudi Arabia and Pakistan hits $700 million.

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Through the Special Investment Facilitation Council (SIFC), Pakistan’s trade connections with Saudi Arabia have grown significantly, with bilateral trade volume rising from $546 million to $700 million and exports to the Kingdom growing by 22%.

As bilateral economic cooperation continues to grow, Saudi investors have shown a strong interest in Pakistan’s construction, energy, agricultural, and information technology sectors. The objective for exporting IT services between the two countries has been raised from $50 million to $100 million.

Saudi Arabia has set up a help desk dedicated to making it easier for Pakistani IT companies to register in the Kingdom in order to expedite commercial procedures. The goal of this program is to speed up economic collaborations between the two countries and lower administrative barriers.

The well-known Saudi restaurant chain AlBaik has revealed plans to open locations in Pakistan, which is a big step for the food service industry and should lead to the creation of new job possibilities in the area.

Officials have noted that stronger business links between the two countries lead to greater economic stability, and the SIFC has played a crucial role in promoting these trade advancements. For bilateral trade and investment projects, the Council remains a crucial facilitator.

According to a trade official with knowledge of the developments, “the establishment of dedicated support mechanisms, such as the help desk for IT companies, demonstrates a commitment to long-term economic partnership,” The goal of these programs is to improve the conditions for commercial collaboration between the two nations.

The increasing amount of trade and the diversity of investment sectors show that Saudi Arabia and Pakistan’s economic ties are changing as both countries seek to deepen their business alliances in a number of industries.

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After more than 50 years, Bangladesh and Pakistan resume direct trade.

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After more than 50 years, the two governments will resume direct bilateral trade, with Bangladesh’s food ministry announcing Sunday that it will receive a supply of 25,000 tonnes of rice from Pakistan next month.

After former Prime Minister Sheikh Hasina was overthrown last August, relations between Bangladesh and Pakistan have begun to improve after decades of tense relations.

Since then, there have been increased bilateral interactions between Bangladesh and Pakistan. Nobel laureate Muhammad Yunus, the interim government’s senior adviser, has met twice with Pakistani Prime Minister Shehbaz Sharif.

According to the food ministry, Dhaka completed an agreement earlier this month to import grains from Pakistan.

“On March 3, the first shipment of 25,000 tonnes will reach Bangladesh,” Zia Uddin Ahmed, a ministry assistant secretary, told Arab News.

“This is the first time that Bangladesh has started importing rice from Pakistan at the government-to-government level since 1971.”

Following direct maritime contact between the two South Asian countries in November—a Pakistani cargo ship stopped in Bangladesh for the first time since 1971 with imports and exports arranged by private companies—their trade relations grew.

Resuming trade with Pakistan is a significant step for Bangladesh, according to Amena Mohsin, a lecturer at North South University and a specialist in international relations.

“We want to see progress in our bilateral relationship with Pakistan. Most significantly, we are currently going through a low point dispute with India, even though we constantly diversify our partnerships.

This most recent move to purchase rice from Pakistan is really significant in this context,” she told Arab News.

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The total amount of Pakistan’s liquid foreign reserves is $15.95 billion.

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As of February 14, Pakistan’s total liquid foreign reserves were $15,947.9 million, with the State Bank of Pakistan’s (SBP) holdings being $11,201.5 million.

Official figures for the week ending February 14, 2025, show that the central bank’s liquid foreign exchange reserves rose by $35 million to $11,201.5 million.

Commercial banks maintained net foreign reserves of $4,746.4 million during the period under review, according to the breakdown of foreign reserves.

The nation’s total liquid foreign reserves as of the week ending February 07, 2025, were $15,862.6 million.

Of these, the central bank held $11,166.6 million in foreign reserves, while commercial banks kept $4,696 million in net reserves.

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