IMF backs Pakistan’s energy policies

Report praises efforts of water and power ministry to meet targets

ISLAMABAD: The International Monetary Fund (IMF), in its report on Pakistan’s economy, has endorsed efforts of the Ministry of Water and Power for improving electricity supply, reducing outages, curbing line losses and tackling the circular debt.

“Concerted efforts to further strengthen power distribution companies’ (Discos) performance have continued to contain the accumulation of new arrears in the power sector,” the report said.



“The end of June 2016 indication target on the accumulation of power sector arrears was met with a large margin, reflecting favourable oil prices, strengthening Discos’ collection and reduction in distribution losses.” The IMF appreciated the power ministry’s efforts to enforce policies to meet the targets given to the distribution companies.

The report said in particular, most distribution companies met their quarterly performance targets in terms of collection and distribution losses at the end of June 2016.

With this, there was no new accumulation of arrears in the fourth quarter of 2016-17 and the stock of outstanding arrears fell slightly.

In a statement, the Ministry of Water and Power pointed out that the circular debt, which was increasing by Rs11 billion to Rs16 billion per month and around Rs200 billion per year, had been effectively managed.

There was only a marginal increase of Rs8 billion in the debt in 2016 compared to Rs200 billion in preceding years. The ministry added that no power losses had been paid off from the budget in financial years 2014-15 and 2015-16 compared to Rs342 billion and Rs138 billion paid in 2012-13 and 2013-14. “Due to government’s efforts to increase bill recoveries, the lower line losses have been instrumental in this regard,” it said.



Overall recoveries of the power sector stood at 94.3% in 2016 compared to 88% in 2013. Similarly, overall technical and distribution losses were curtailed with a decrease of 1.1% from 19% to 17.9%.

Both the increase in recoveries and decrease in line losses translated into a direct cash benefit of Rs60 billion to the power sector, the ministry said.

In addition, aggregate technical and commercial losses in the power sector came down to 22.46% from 27.52%. Owing to improved financial health of the power sector, Pakistan State Oil, the state-owned oil marketing giant, received 126% payments against its invoices, showing an extra Rs61-billion payments.

Similarly, independent power producers (IPPs) received 104% payments against their invoices and gas companies also received 104% payments in 2016. The maximum power generation in the year reached 17,350 megawatts. The improved financial health and smooth payment mechanism has not only encouraged the existing IPPs to contribute maximum power generation but has also encouraged significant new investments in the country.

Published in The Express Tribune, October 15^th, 2016.

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