- Govt in talks with the banks to borrow RS1.3TN to facilitate circular debt.
- Negotiations in progress to finalize the term sheet to obtain a loan.
- The secretary of power says that Govt trying to reduce taxes on public service bills.
The federal government is pushing to reduce the prices of electricity from RS6-8 per unit in the next two months in order to relieve essential consumers, officials of the energy division announced on Monday.
The high cost of electricity has become a controversial political problem, the opposition parties taking advantage of public dissatisfaction to criticize management by the government out of the energy sector and agreements with independent power producers (IPP).
The burden of high electricity prices falls disproportionately on the segments of the company with average and low -income income, fueling public indignation and eroding confidence in the government’s ability to manage the economy.
Federal Secretary Energy (electricity division), Dr. Muhammad Fakhr-Elam Irfan, told the senatorial committee of power on Monday that the government worked on the reduction of taxes on electricity bills, but noted that ‘Such a decision would require the approval of the International Monetary Fund (IMF).
“Discussions with the IMF on this subject should take place in the first or second week of March,” he added.
Officials of the electricity division also declared that in the context of cost reduction measures, negotiations with PPI had saved the government of 700 billion rupees, in particular by removing 300 billion rupees of payments of payments interests.
“Until now, agreements with six PPIs have been terminated, while discussions with 25 others on a model” take and pay “have been finished,” they added.
Stressing that the ultimate objective of the government was to put the circular debt to zero as soon as possible, the officials said that the authorities were also in talks with a working group supervising public electricity to rationalize operations and further reduce costs .
They also revealed that to tackle the growing circular debt in the electricity sector – currently estimated at around 2.3 billions of rupees – the government was in talks with banks to guarantee a loan of 1.24 Billion rupees at a fixed rate for a specific period.
The central bank’s policy rate retired to 12% 22% online with expectations, because inflation has been held and growth should recover after 1,000 basic points (BP) of rate decreases in the past six months.
The State Bank of Pakistan (SBP) reduced rates by 22% of all time last June, one of the most aggressive measures among the central banks of emerging markets and exceeding its 625 pb of rate drop in 2020 for The Pandemic COVID-19.
“The discount rate can further lower and the authorities aim to capitalize by borrowing RS1,242 Billions,” said an official, adding that talks with banks were underway to finalize the term before the arrival of the IMF mission.
Development comes as one of the two IMF missions arrived in Pakistan for climate financing talks, while the second will go next month for the first review of the country’s progress under the installation of extended funds of $ 7 billion (EFF).
Earlier, the Minister of Finance, Muhammad Aurangzeb, also confirmed that an IMF delegation would realize next month to discuss key issues related to the EFF.
Analysts noted that a successful renegotiation with local and international PIPs would considerably reduce the prices, stimulate industrial competitiveness and increase public confidence in the government’s ability to effectively manage the economy.