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Pakistan likely to face IMF’s anger over delay in gas tariff notification

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1 year ago

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  • Ogra has determined 45% to 50% hike on June 2.
  • IMF to review next loan tranche in Nov this year.
  • As per law, Ogra must notify required raise in tarrif.

ISLAMABAD: Amid failure to notify a hike in gas tariff, Pakistan is likely to face annoyance from the International Monetary Fund (IMF) ahead of its next review under the $3 billion Stand-By Arrangement (SBA).

The Oil and Gas Regulatory Authority (Ogra) had already determined a 45% to 50% hike on June 2 this year, but following the government’s failure, annoyance from the Washington-based lender may become inevitable before it reviews the country’s SBA loan for the next tranche of $1 billion in November this year.

The caretaker setup Islamabad, therefore, is left with no option but to approve the hike by 45% to 50%. Ogra has also sensitised the interim administration regarding the imperative increase in gas prices, ahead of the top Energy Ministry officials told The News.

The country’s gas regulator had last announced a 50% increase in prices (Rs415.11 per MMBTU) for consumers of the Sui Northern Gas Pipeline Limited (SNGPL) bringing the subscribed gas price up to Rs1238.68 per MMBTU. Ogra also hiked prices by 45% (417.23 per MMBTU) for the consumers of Sui Southern Gas Company Limited (SSGCL) for 2023-24.

“The relevant authorities have sensitised caretaker federal minister for energy how imperative an increase in gas prices is. If the government does not take the required action in 40 days after the determination by Ogra, then the regulator must notify the required raise in gas price as per the law amended on the directives of IMF and World Bank.

Now 83 days have elapsed since the determination by Ogra about an increase in gas prices by 45-50%,” the Energy Ministry officials said.

Both the gas companies are facing a shortfall of Rs657.766 billion. The Fund may also take up this very issue any time with the government prior to the review meetings.

The Petroleum Division tailored various scenarios for an increase in gas prices based on political damage control under which low-class consumers would be passed less increase and high-end consumers would be passed on the maximum increase to compensate for the low-end consumers.

However, the former Pakistan Democratic Movement (PDM) government failed to take the decision to this effect and now the responsibility rests with the caretaker setup about an increase in gas tariff.

The SNGPL still has the previous year’s accumulative shortfall of Rs560.378 billion up to FY23, while Sui Southern has a shortfall of Rs97.388 billion and this is how the existing shortfall of both the gas companies stands at Rs657.766 billion.

The IMF wants the government to carve a strategy to end oil and gas sector circular debt which stands at Rs1.7 trillion, out of which gas sector circular debt is at Rs1.3 trillion. The PDM government had submitted a plan to the IMF to manage the gas sector’s circular debt based on the dividends plowing back schemes to reduce Rs543 billion without the consultation of Oil & Gas Development Company (OGDCL).

According to the plan, the federal government would inject around Rs414 billion into the Sui Northern and Sui Southern gas companies through supplementary grants for payment of outstanding dues to gas producers, OGDCL, Pakistan Petroleum Limited (PPL) and Government Holdings (Private) Limited (GHPL).

Out of these funds, the Sui Northern Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL) would clear outstanding liabilities of about Rs225 billion to the OGDCL, Rs62 billion to the PPL and Rs127 billion to the GHPL. On top of these, OGDCL and PPL would arrange about Rs56 billion on their own and partially liquidate some of the investment bonds.

In return, the three gas producers would pay Rs475 billion dividends to the federal government on their retained earnings, estimated to be around Rs1.44 trillion as of June 30, 2022. The government currently holds 100% stakes in GHPL, 85% in OGDCL and 75% in PPL.

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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3 days ago

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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Business

The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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