IMF talks on power sector reform pace remain inconclusive

Talks at the technical level between Pakistani authorities and the International Monetary (IMF) reportedly remained inconclusive on the pace of power sector reforms with the latter reportedly expressing concern over non-implementation of the tariff agreed during the second to fifth review talks held in February 2021.

Technical level talks were to conclude on Friday and policy level talks are scheduled in Washington DC.

Finance Minister Shaukat Tarin is scheduled to leave for Washington DC on October 12 to attend the annual meeting of the World Bank and IMF scheduled from 11 to 17 October 2021. It is not clear whether Tarin will hold policy level talks after or on the sidelines of the annual meeting.

On the condition of anonymity, an official conceded that power sector reforms remained the major bone of contention during the technical level talks and the government was unable to convince the Fund of implementability of its circular debt management plan designed to arrest the mounting circular debt.

Pakistan had pledged to increase power tariff by Rs1.39 per unit from June 1, 2021, however, shortly after being appointed as Finance Minister Tarin made it clear that any increase in power tariff would be detrimental to productivity and government’s overarching objective of growth.

Power base tariff to be further raised, IMF told

The official said although during the discussion revenue came under discussion, however, it was not a major concern on the premise that if tax collection continues at the current pace by the end of the year it would easily reach Rs 6 trillion. This would help offset any shortfall on account of petroleum levy. The official said that imposition of any new or additional taxes with the prevailing price rise seems unlikely.

When contacted, the IMF resident representative Teresa Dabán Sanchez stated that “IMF team is at present engaged with our Pakistani counterparts on conducting discussions. We stand ready and looking forward to our continued discussions with the Pakistani authorities on the set of policies and reforms that could form the basis for the completion of the 6th review under the EFF.

“As you know, we would only issue a statement at the end of the discussions but not ‘during’ the discussions.”

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