TRADE & ECONOMY

IMF Rejects Subsidy on Electricity Bills, Citing Risk to Loan Program Approval

IMF blocks Pakistan's plan to subsidize electricity bills, warning it could threaten the loan program approval.
2024-09-03
IMF Rejects Subsidy on Electricity Bills, Citing Risk to Loan Program Approval

The International Monetary Fund (IMF) has firmly opposed the Pakistani government's plan to subsidize electricity bills, stating that such actions could endanger the approval of the ongoing loan program. According to sources within the Ministry of Finance, the IMF emphasized that both the central and provincial governments are not authorized to provide subsidies on electricity and gas bills under the existing agreement.

 

The IMF's objections specifically target the Punjab government's recent initiative to offer relief on electricity costs. Sources reveal that the IMF has demanded the withdrawal of these subsidies by September, warning that failure to comply could result in severe repercussions for the loan program.

 

The Ministry of Finance has responded by issuing directives to provincial governments, advising them to avoid any form of untargeted subsidy. The ministry's communication highlighted that funds earmarked for development programs cannot be diverted to subsidize electricity bills.

 

Finance Minister Muhammad Aurangzeb, speaking to GeoNews, clarified that while the IMF opposes general subsidies, targeted assistance through the Benazir Income Support Programme (BISP) remains permissible. Aurangzeb stressed that subsidies could still be provided to the most deserving sections of society through BISP, ensuring that the relief reaches those who truly need it.

 

This development comes after the Punjab government announced a significant relief of PKR 14 per unit for consumers using 200 to 500 units of electricity over two months. Following this, the Sindh government also presented a similar plan to the federal government, seeking to reduce electricity costs.

 

The IMF's strong stance underscores the stringent conditions attached to its financial assistance, requiring strict adherence to agreed-upon measures to maintain fiscal discipline and ensure the stability of Pakistan's economic recovery.