Power sector to take centre stage in IMF talks

Finance Minister Shaukat Tarin said on Wednesday that power sector would be the centre of discussion with the International Monetary Fund (IMF) in the forthcoming 6th review as performance on revenue collection has been well over target.

Addressing a news conference along with SAPM to Prime Minister on Food Security Jamshid Cheema and State Minister for Information Farrukh Habib, the finance minister said that the IMF had sought an increase in electricity tariff to reduce the circular debt but they were requested “to allow us to do our own way”.

“We have taken three-month time from the Fund and as the time would complete ahead of the forthcoming review, the discussion would focus on the power sector,” he said. Tarin maintained that some improvement in the power sector has been made and the flow of circular debt has been reduced considerably.

The finance minister said that Pakistan would discuss with the IMF its own plan and would try to find out some mechanism.

He said that the revenue and the imports have been increasing and so was Large Scale Manufacturing (LSM) indicating the economic activity but his concern is the economy should not overheat.

Tarin further stated that the exchange rate has been fluctuating and increased from Rs152 to Rs169 and the primary reason behind fluctuating exchange rate was the rise in the oil prices, as well as, an increase in imports as the economy has been growing and the US dollar was also going to Afghanistan from Pakistan.

There is a demand for dollars in Afghanistan, so the dollars from Pakistan are being sent there, as well.

The finance minister said that if the government had intervened in the exchange rate, it would not have gone to Rs169. He said it is close to real effective exchange rate.

The government has decided to place 100 percent cash margin and would impose regulatory duty on some items to check unnecessary import of luxury and non-essential items, he said. The government would provide cash subsidy to 12.5 million families on wheat, sugar, pulses, and other essential commodities to support them against dearness in the country consequent to Covid-19, said the finance minister. He added that the world’s supply chain and production was badly affected due to the coronavirus and consequently, the prices of the essential commodities are at the highest level of the last 10 years.

However, he said, in Pakistan during the last two years, inflation has come down in urban (from 15pc to 10pc) and in rural (from 17.8 pc to 9.1pc) areas. “We are also providing tax relief on edible oil to bring down the prices by Rs45- 50 per kg.”

The government has also started releasing wheat to flour mills at Rs1,950 per 40kg and sought commitment from them that flour bag weighing 20kg would be sold at Rs1,100 in the market, he said.

The minister said that the price of sugar has been fixed at Rs90 per kg and difference between actual and subsidised price would be picked up by the government.

Tarin said that administratively, the government was working on measures to reduce the role of middleman, which was making a whooping profit of 300 to 400 per cent. This is not acceptable, the finance minister said. He said that sugar in the world market was $240 per tonne in 2018 and now it is $430 per tonne.

The finance minister said that the price of petroleum products has increased 50 percent globally and the government passed on only 13 to 14 percent and the remaining was absorbed through petroleum levy.

The government has projected a target of Rs600 billion on account of petroleum levy in the budget for the ongoing fiscal year and the shortfall would hit the revenue. Therefore, he said that the criticism of the opposition on petroleum products was unjustified.

Tarin said that another big measure was being taken to provide cash subsidy to 40 to 42 percent population, besides reviving the price magistracy system to effectively control the prices.

The finance minister said that the people’s income level would increase with growth in GDP.

In addition, the finance minister said that the Kamyab Pakistan Programme would be launched next month to support the poor.

However, Cheema said Pakistan has been selling petrol at the cheapest and drew a regional comparison to explain that petrol price in India was Rs201 per litre, while in Pakistan it was being sold at Rs124, and price of diesel is Rs180 in India while in Pakistan it is at Rs123 per litre.

“Apart from Egypt and petrol exporting countries, the petrol is cheapest in Pakistan,” he added.

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