Pakistan Hopes to Solve Tariff Issue With New Proposals to IMF and WB

The Power Division will submit a new Circular Debt Management Plan (CDMP) to the International Monetary Fund (IMF) and the World Bank, reported Business Recorder.

The proposal will be submitted at the end of the current month with an innovative approach, the news report added.

The Power Division will likely review the terms and conditions of public debt used to establish power plants by the government, like RLNG-fired plants, Neelum Jhelum Hydropower Project, as well as other WAPDA hydropower projects.


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“The proposal suggests extending the debt payment tenures, reducing the interest rate, and/or extending the payment period of loans that are financed by the public sector, such as those of the K-2 nuclear power plant,” added the report.

These steps will lead to a reduction in costs that can then be adjusted to avoid an increase in tariffs. The tariff subsidy might also be revised upwards from its current budgeted level of Rs. 330 billion. One proposal to achieve this is to take the extra amount from the Public Sector Development Program (PSDP) as PSDP allocations are rarely fully utilized.

The news report quoted sources saying that there is also a third option under concern. However, it will not be applicable in the current calendar year. That option is for Pakistan Railways to lay a line from coal mines of Thar and connect it to the Railway network.

The estimated cost of this project is Rs. 26 billion with additional Rs. 20 billion as the cost of wagons for this track, making the total estimated cost to be Rs. 46 billion.

In addition to this, the already operational Sahiwal coal-fired plant – which is currently operated on imported coal – can be run on 50 percent of the local coal without needing any modifications, which will further reduce cost.


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The improvement in the Rupee-Dollar exchange rate will also be adjusted, as the previous tariff was determined based on Rs. 167 per dollar, which has now come down.

The World Bank officials are very unhappy with the tariffs not being increased by Rs. 1.39 per unit from 1 June 2021, as the agreement had stated. The finance minister said earlier that Pakistan is seeking fiscal space from the IMF and the WB on the tariff increase issue. In the meantime, the cabinet has already approved other required reforms, such as privatization of DISCOs.



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