The World Bank and the International Monetary Fund (IMF) increase pressure on Pakistan to increase the power tariff at the start of 2022.
In the recent round of meetings, the WB has added this condition to release $1 billion credit loan for energy projects with an increase in power tariff.
The main demand of the World Bank is an increase in base tariff which is a political decision as it carries a price that has to be paid by the political government. However, an adjustment in quarterly tariff monthly FCAs will continue,” a newspaper reported.
The government had given an undertaking in writing to the World Bank and IMF that base electricity tariff will be increased by Rs3.34 per unit in two stages. Subsequently, the first increase of Rs 1.95 per unit was notified in February 2021 but the remaining increase of Rs 1.39 per unit, due from June 1, 2021 was put on ice, after both the Prime Minister and Finance Minister refused to honour the commitment on the plea that the consumers including domestic and industry could not bear any additional burden.
The government approved the CDMP to address arrears in the energy sector and notified the absorption of debt owed by the PHPL into the public debt stock as and when the underlying instruments matured. At the end of FY20, payables of the CPPA-G amounted to Rs1.150 trillion or 2.8 percent of GDP.
With support from the proposed operation series, the government agreed to retire Rs700 billion of arrears owed by the CPPA-G to the Independent Power Producers (IPPs) through the issuance of government general bonds between FY21-23.
From FY24 onwards, the government will settle pending arrears using the additional fiscal space created by higher revenues and/or reallocation of budgetary resources.