The International Monetary Fund (IMF) has imposed new conditions on Pakistan after Punjab’s decision to offer an electricity subsidy of Rs. 14 per unit for two months.
The lender has mandated that this subsidy must end by September 30 and further prohibited any provincial government from introducing similar subsidies during the 37-month Extended Fund Facility (EFF) program, reported Express Tribune.
These conditions jeopardize the Government of Punjab’s plan to distribute Rs. 700 billion worth of solar panels to consumers with monthly usage of up to 500 units. The IMF’s new conditions also require provincial governments to refrain from implementing policies that could undermine commitments under the new $7 billion program. This effectively restricts provinces from taking independent fiscal actions without consulting the Finance Division, particularly those that could impact agreed structural benchmarks.
Also, the IMF has criticized the financial management of Punjab and Sindh with their ridiculously overestimated revenue projections that could hinder the federal government’s ability to achieve the required Rs. 1.24 trillion cash surplus.
Meanwhile, the federal government’s plan to reduce electricity prices by Rs. 6 per unit, which involves spending Rs. 2.8 trillion, has also drawn skepticism from the lending agency. The plan is based on some bold assumptions of collecting Rs. 1.4 trillion from the provinces and the rest via commercial loans, neither has yet secured IMF approval.