WASHINGTON: As people in Pakistan are already crushed by rising energy prices, the International Monetary Fund says recent increases in electricity and gas tariffs were important to shore up energy sector viability, but broader reforms are still needed to tackle the structurally.
The IMF in a report on the first review of the stand-by arrangement says the caretaker government took significant action in the power and gas sectors to stem the rise in circular debt, which, combined, reached approximately 5.25 per cent of GDP by the end of last fiscal year 2022-23.
Moreover, energy subsidies are also limited to Rs976 billion in the 2023-24 budget, the report mentions – the reason why the power and gas tariffs have jumped to the record-high levels, triggering a cost of living crisis and unparalleled cost of doing business.
Timely implementation of scheduled tariff adjustments and broader reform efforts are critical to restoring energy sector viability, the IMF notes.
As far as the gross domestic product (GDP) is concerned, the IMF has predicted a 2pc growth rate for the current financial year ending on June 30 and cited an improvement in foreign reserves from $4.2 billion to $8.2bn.
It says Pakistan achieved all the targets set for the first quarter July-September, the IMF said, but added that the industrial sector was facing difficulties with a growth rate of just 2.5pc – an obvious consequence of increasing the energy tariffs and interest rates, propelling the cost of doing of business to the highest level in the country’s history.
However, the agriculture sector witnessed a 5.1pc, the IMF added.
About the rising prices, the world’s stop lender said inflation in Pakistan was recorded at 36pc in May which slid to 26.8pc in October. However, the report didn’t mention that the alarming increase since then as food inflation is pushing the over figures up, with the Sensitive Price Indicator (SPI) climbing to 44.64pc on year-on-year basis for the week ending January 18.
The IMF also welcomed the improved revenue collection which, it said, helped arresting the widening deficit and said Pakistan has also taken the required steps to stop cross-border smuggling of US dollar.
Pakistan’s budget deficit would be around 7.6pc of GDP, the IMF forecast says, with the current account deficit hovering around 1.6pc of the GDP.
Earlier, the latest official data showed that the country had witnessed a massive reduction in current account deficit during the first six months of 2023-24.
