IMF asks govt to provide clarification on industrial package

The International Monetary Fund (IMF) has sought clarification from Pakistan on the announced industrial package.

Finance Secretary Hamid Yaqoob on a query informed that the review is still going on and IMF is fine with December numbers.

They are seeking clarifications about the package and hopefully the review will complete sometime next week, he added.

The government and IMF started negotiations on the ongoing seventh review of the $6 billion Extended Fund Facility program on March 4, 2022.

Sources said that the government has shared details with the IMF in regards to slashing of Rs5 per unit electricity price and its financial implications.

The financial implications of the Prime Minister’s electricity package would be Rs115 billion on account of Rs5 per unit cut in tariff and Rs21.47 billion on account of fuel impact.

The reduction of Rs5 per unit in tariff for residential and commercial consumers would entail Rs16.20 billion for DICSOs in the month of March 2022 and Rs2.91 billion for K-electric while fuel impact for DISCOs is estimated at Rs10.22 billion and K-electric impact of Rs0.08 billion. 

Similarly, DISCOs impact on account of tariff for the month of April is projected at Rs21.75 billion and K electric at Rs3.74 billion while fuel impact was estimated at Rs6.27 billion for DISCO and zero for K-electric.

Sources said that prime minister package has also been worked out on the assumptions of coal prices at $232/MT while RLNG prices at $15 MMBTU for the month of March followed by $17 MMBTU for April, $16 MMBTU for May and $15 MMBTU for June 2022. 

Fuel Charges Adjustment (FCA) projections have been made on the assumptions that crude oil prices would be at $95 per barrel and at an exchange rate of Rs180, sources added.

In addition the gap for FCA subsidy for DISCO is Rs2.86 per kWh for March 2022, Rs190 per kWh for April, Rs0.26 per kWh for May and Rs0.55 for June 2022 while subsidy gap of K-electric was Rs0.21 for March 2022 and Rs1.15 for May 2022.

The government also informed the IMF that the finance ministry will release the subsidy amount as advance in the beginning of each month divided in four equal installments worth Rs34 billion.

The finance minister Shaukat Tarin in a media briefing informed that the government announced the subsidies on the back of improved revenue collection.

The IMF should not have problems with the relief package, as Pakistan was neither increasing its fiscal deficit nor taking any loans to provide relief to the people, he added.

It is pertinent to note that Prime Minister Imran Khan on February 28, 2022 announced reduction of prices of petroleum products by Rs10 per litre, cut in electricity price by Rs5 per unit, and a targeted tax amnesty scheme for the industrial sector.