IMF imposes strict conditions on Pakistan after Punjab’s electricity subsidy move

The International Monetary Fund (IMF) has imposed three new conditions on Pakistan after the Punjab Government Rs14 per unit electricity subsidy for two months. 

According to a news report, the IMF has demanded that this temporary subsidy be terminated by September 30th and has made it clear that no provincial government will be allowed to introduce any new subsidies for electricity or gas during the 37-month Extended Fund Facility (EFF) program. 

This new stipulation also raises doubts about Punjab’s Rs700 billion plan to distribute solar panels to consumers using up to 500 units of electricity monthly.

Punjab’s subsidy plan, approved in August for consumers using 201 to 500 units of electricity, has now put additional strain on the government’s negotiations with the IMF. 

The IMF has required that all provincial governments refrain from introducing any policies that could undermine commitments made under the $7 billion program. This condition could limit provincial fiscal autonomy, particularly in matters like agriculture income tax, property tax, and sales tax on services.

Another new condition mandates that provinces consult the Finance Ministry before making any fiscal decisions that could affect the structural benchmarks agreed with the IMF. 

The IMF’s increased scrutiny over provincial budgets, particularly those of Punjab and Sindh, comes as the federal government struggles to secure approval for the $7 billion loan program.