The reasons for delaying the notification was more political than economic in nature as the government feared backlash in the midst of ongoing sit-ins staged by Pakistan Tehreek-e-Insaf (PTI) and Pakistan Awami Tehreek (PAT), according to sources in the Ministry of Finance and Water and Power.
Their protests – that recorded their 28th day on Thursday – have made it difficult for the government to implement the 4% increase in power tariffs and another 3% on account of special surcharge to recover the losses due to delay in increasing tariffs, they added. Originally, the increase was proposed to be 4% with effect from July.
Due to the government’s move, the IMF’s Executive Board will not meet on September 26 to approve the fifth loan tranche, according to officials. The body has set the notification of increase in power tariffs as prior-action that has to be implemented for seeking an Executive Board meeting to approve the fifth loan tranche of $550 million.
Owing to differences over the timing and percentage of the increase in prices, Pakistan and the IMF could not conclude the fourth round of talks that held from August 6 to 18 in Dubai. This was for the first time since September last year when Pakistan signed the three-year bailout package that both sides could not conclude the talks.
Finance Minister Ishaq Dar recently blamed PTI for the possible delay in release of the next tranche.
After the Dubai round, Pakistan and the IMF continued discussions via video conferences with the aim of securing a timely completion of the fourth review but this effort also remained fruitless, according to officials in the Ministry of Finance.
According to officials, the Washington-based lender wanted the increase to be implemented from July – a demand that was rejected by Pakistan.
Unlike the 2008 three-year Stand By arrangement of $11 billion that also derailed prematurely, this time the IMF has distributed the $6.6 billion in 12 equal tranches aimed at ensuring implementation of its desired policies, according to analysts.
The IMF has so far disbursed $2.2 billion in four equal tranches. Experts said that the delay in release of the next tranche will not adversely affect the country’s foreign currency reserves. However, it will work as a spoiler to Pakistan’s economic relations with other international lenders, they added.
They said Pakistan may face difficulties in seeking loans from other lenders, mainly the World Bank and the Asian Development Bank.
The spokesman of Ministry of Water and Power was not available for comments, while the senior official of Ministry of Finance said the government was still trying to come up with a mechanism to implement the increase.
According to another official of the finance ministry, the increase may be implemented from next month. However, it will again depend on whether the PTI and PAT call off their protests.
The IMF staff would present its report to the Fund’s Executive Board only after the increase in power tariffs. Upon approval of the report, the international lender will disburse the fifth loan tranche of over $550 million.
Published in The Express Tribune, September 12th, 2014.
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COMMENTS (20)
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@Hari Om: Fact is that Pakistan commits, but never delivers on anything as we Indians have found out. The Americans figured it out recently and IMF may soon follow.
@imran ali: Based on your post, I cross-checked my electricity bill with tariffs charged by various electricity companies in Pakistan and I was shocked to see that Pakistanis pay more than double what I pay at my highest slab. But then I live in a state that mostly generates hydroelectricity. Also pilferage is low and the electric supply gets cut if I don't pay my bill for more than a month.
To be honest the PML-N is reaping the results of 5 years of failed corrupt PPP-Z policies in the power sector.......... the PML-N's fault is that despite promises to bring the corrupt to justice they are instead shielding them.
I ain't paying my bills, so I dont give a damn.
Great news, our nation does not need any loan from IMF, just start getting the tax from rich landlords and industrialists, this will take care of all the national issues.
I refuse to pay for energy thieves, and line losses. Apply high tariffs and increased load shedding to those areas where recovery is less than comfortable levels.
@unbelievable.... Electricity tariff in Pakistan is highest as compare to other South East Asian countries,......http://www.thenewstribe.com/2014/05/16/power-tarriff-in-pakistan-highest-in-south-east-asia/....Now change your name to "Believable"'
Good riddance. Get rid of IMF and other aid. No country has even risen in the comity of Nations with aid. We need to rise as one Nation. These loans are trap and can destroy a country's economy(Indonesia and Brazil are a case in point). PMLN is on a hidden agenda of international establishment. The sooner we get rid of corrupt Sharif government the better.
The solution for self reliance is if people of Pakistan pay their due taxes according to law. Unless this is done,Pakistan will never progress.
beggers can't be choosers, must increase the electricity rate now, if you need more money for corruption.
Doesn't IMf own the country by now?
The plan of govt is looting with four hands not with two hands, that's why they have taken PKR 500 billion in first 100 days of govt and still trying for loans. who will pay the loans? all our pakistani nation through electricity bills and heavy inflation on daily used products........... please wake up pakistani nation. otherwise more of you will not be able to live and suicide.
Raising the electricity prices in Pakistan and that be determined by an international financial institution and in what capacity? It seems I am never going to understand the manipulation of facts by the Government officials in the name of diplomacy and politics. IMF doesn't ask to raise the prices, the terms and conditions of this loan have been set in consultation and with the consent of our representatives..... I am surprised over the manipulation of statements..... interestingly PTI and PAT are being blamed for not getting the share of loan this time lolz.....
Along expected lines. Pakistan has a well-established track record of irresponsible behaviour at the IMF of reneging on written commitments resulting in all but one of Pakistan’s forays to the IMF being aborted before the last tranche was disbursed. Express Tribune informs that “Since 1988, Pakistan has sought bailouts from the IMF 11 times and failed to complete all but one of them.”
http://tribune.com.pk/story/230499/imf-programme-we-tried-we-failed-we-give-up/
Indeed this irresponsible state behaviour by Pakistan is not limited to the IMF and is echoed in Pakistan proliferating nuclear weapon technology , fomenting Islamic terrorism impacting all its neighbours, China, Iran, Afghanistan and India, promising India MFN status and the dragging its feet etc.
YOu beg internationally and then spend levishly. You have spoiled around 100 billions PKR (1 billion USD) on metros of Lahore and Rawalpind. Can a poor country like Pakistan spend so much on transportation???? when our education, health, security and livilihood are at stakes?
Great news, perhaps that's what we need as a nation in order to rely on our own resources instead of always looking for a handout. We have become a nation of beggars always looking for aid or some bail out or a loan from IMF. May be it's time for yes to grow up and face our problems on our own.
Lol. What happened to the heavy mandate? Why is pmln under so much pressure from "empty chairs"?
Fail after fail by N league government. Nawaz should just resign now instead of blaming PTI for everything.
Pakistan can no longer afford to subsidize energy or anything else. There is no logical reason why the rest of the World should support these these low rates IMF should defer any more funding until Pakistan implements loan provisions that were negotiated. You can't rely on Pakistan word - time to make them actually implement what they promise.