ISLAMABAD : Pakistan will seek six-month waiver, from International Monetary Fund (IMF), for ending subsidy on electricity from June 30, said Advisor to Prime Minister on Finance Shaukat Tarin. Talking to media here on Friday after the Conference on Privatisation with Public Private Partnership, he said that formal request for additional $4 billion 'Flexible Credit Line' (FCL) facility was sent to IMF, which would be approved by its board in the next session.
Replying to a host of questions, like increase in prices of petroleum products, their impact on common man, electricity tariff, circular debt, and decline in National Saving Schemes' profit rates, Tarin said that he would hold talks with the IMF and World Bank for not ending subsidy on electricity in the upcoming meeting with WB.
He said that the government would bear the cost of continuation with the subsidy on electricity and would not seek money from the IMF or World Bank. "Pakistan does not need any additional loan from the IMF or WB except $4 billion FCL facility as it would be kept as buffer, and would only be used in case of delay in commitments by Friends of Democratic Pakistan (FODP).
The Advisor said that no allocation was made in the budget for subsidy on electricity because the plan was to pass the electricity tariff differential on to the consumers after June 30. The load shedding did not allow ending the subsidy by increasing tariff differential. The decision to increase the power tariff was held on till load shedding would be over, he added.
About circular debt, he said that 'holding company' has been created with the decision to clear the backlog by August 15, but the real challenge for the government is how to fill Pakistan Electric Power Company (Pepco) revenue and expenditure gap. This gap is tariff differential, which could have been bridged by withdrawing subsidy on electricity, but now the government has to pay this tariff differential to Pepco on monthly basis.
The Advisor defended the surcharge on petroleum products by asserting that it was also applicable with much higher 64 percent in developed countries and 44 percent in developing countries whereas in Pakistan it was only 37 percent, including surcharge and all taxes. He said Pakistan is not an oil-rich country, like Arab countries, and the need is met through import. Therefore, the government wanted its minimum consumption.
He brushed aside the impression that the government had to do anything with the increase in oil prices, and asserted that local oil prices were linked with the international prices, in the Finance Bill.
Tarin admitted that increase in petroleum prices would impact inflation, but this would be offset with some relief on gas and electricity. He expressed hope that inflation would be brought down to single digit, and said that National Saving Schemes profit was curtailed because of linkage with the Pakistan Investment Bonds (PIBs), which were linked with inflation. He said it was not possible for the government to keep the profit of NSS high with the inflation coming down from 24 percent to 12 percent. Tarin said he would be holding talks with the major members of FoDP wherein it would be decided when and in which sectors money pledged by them would be forthcoming.
Copyright Business Recorder, 2009 |
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