Pakistan approves major hike in power tariff to meet IMF demands

In a bid to meet the International Monetary Fund's (IMF) terms, Pakistan's federal cabinet has authorized a significant increase in the electricity base rate.

The hike, approved on the recommendation of the National Electric Power Regulatory Authority (Nepra), will see the basic power tariff rise by PKR 3 per unit for certain customers and by PKR 7.5 per unit for others. The IMF had requested Pakistan to raise power and gas tariffs, reduce subsidies, and implement monetary policy reforms to tackle inflation and stabilize the economy.

The new tariff is expected to take effect from July 1, subject to Nepra's approval after a public hearing. The move comes as Prime Minister Shehbaz Sharif reaffirmed his commitment to adhere to the IMF agreement.

The IMF's country report also highlighted the need for pension and monetary policy reforms, reducing expenses related to salaries and pensions, and clearing the pending dues of the power sector. The international lender welcomed the strengthening of the Benazir Income Support Programme (BISP) through targeted expansion but urged further efforts to ensure enrollment of all deserving families into the schemes.

The IMF executive board recently approved a USD 3 billion bailout loan program for Pakistan, providing financial stability ahead of upcoming elections. The first tranche of USD 1.2 billion has been received by the State Bank of Pakistan, with the remaining USD 1.8 billion to be released after two reviews.

Additionally, Pakistan's foreign reserves received a boost with deposits from Saudi Arabia and the United Arab Emirates amounting to USD 3 billion. Despite the economic assistance, Pakistan faces challenges such as an anticipated rise in the unemployment rate and a financial loss of 7.5 percent, with the debt ratio reaching 74.9 percent.