Pakistan has received a brief reduction in electricity costs from the International Monetary Fund (IMF). For customers who consume up to 200 units of energy over a three-month period, Pakistan is permitted to postpone payment of their energy bills. In return for this assistance, Pakistan must announce a 50% rise in gas prices and put more stringent policies in place to combat electricity theft.
According to reliable sources, Caretaker Prime Minister Anwaarul Haq Kakar and his cabinet have not yet approved this arrangement. For customers who do not qualify for subsidies and use up to 200 monthly units, the IMF has provisionally approved a three-month payment plan for electricity bills in August. Users of lifelines or those who are protected from price increases will not, however, benefit from this alleviation.
The IMF initially rejected the government’s request for a comprehensive relief scheme covering consumers using up to 400 units, but as of August 2023, users using up to 200 units will have the option of paying their bills in installments. Furthermore, there won’t be an additional 10% fee for late payments. If the Prime Minister and Federal Cabinet give its final approval, this proposal might help about 4 million electricity users.
For consumers who consumed up to 400 monthly units, or 81 percent of the total consumer base, the government initially tried to spread out bills for them. However, the IMF turned down this proposal. The IMF has ordered Pakistan to simultaneously launch a crackdown on power theft and increase bill recoveries, all while rising gas prices, in exchange for the reduction in electricity bills.
The Oil and Gas Regulatory Authority has already established new gas prices in Pakistan, and the IMF has urged them to be approved. The lender has also suggested using the weighted average cost of gas (WACOG) method to have consumers pay the entire cost of imported gas. This entails figuring out the cost of gas by taking into account both local and imported LNG rates, figuring out an average price, and then setting consumer-specific prices in accordance.
Pakistan has also been asked by the IMF to increase efficiency by thwarting electricity theft and collecting past-due debts. Notably, increased recovery initiatives in the gas and electricity sectors may be able to lessen the demand for revolving loans, improving the financial stability of these essential services.
