Amid economic crisis, Pakistan government approves new tax on power to meet IMF conditions

Amid the economic crisis, the Pakistan government has approved a new tax on power in order to meet the International Monetary Fund (IMF) conditions, media reported citing an official statement.

Pakistan said it has agreed to the IMF conditions to tackle the worsening economic crisis. The South Asian nation reached out to an international financial institution to secure a loan.

The nation is in desperate need of financial support to keep its economy afloat. The payment is part of a $6.5 billion IMF bailout Pakistan signed in 2019, but it has been stalled since last December.

Pakistan's Finance Minister Ishaq Dar said on Friday that the nation agreed with the IMF on the clauses to release about $1.1 billion in critical funding. The minister added that the payout was delayed due to "routine procedures".

After Friday's presser, the minister chaired the meeting of the Economic Coordination Committee (ECC) of the cabinet.

During the meeting, the officials approved the imposition of a special financing surcharge of Rs3.39 per unit in average power tariff in addition to quarterly tariff adjustments of up to Rs3.21 per unit for one year and recovery of pending fuel cost adjustments of up to Rs 4 per unit for about three months.

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Reports have mentioned that the ECC also approved the discontinuation of power tariff subsidies to zero-rated industries as well as the Kissan package with effect from March 1.

The Ministry of Finance said in a statement on Saturday that in order to meet another condition, an additional budget subsidy of about Rs 335 billion was also included in the meeting that approved an overarching Revised Circular Debt (power sector debt) Reduction Plan worth Rs952 billion for the current fiscal year.

These measures would burden the common people with costly electricity and other household items.

Dar said on Friday, "God willing, we will try to complete the IMF programme for the second time in Pakistan's history with the same spirit." His statement came hours after an IMF mission left Islamabad after 10 days of talks.

A report by Pakistan-based media outlet DAWN mentioned that the authorities have agreed with the IMF on conditions such as: imposing taxes amounting to Rs170 billion (PKR), minimising untargeted subsidies in the gas and energy sectors, ensuring that there is zero addition to the gas sector’s circular debt and a couple of more points regarding petroleum development levy and BISP.

(With inputs from agencies)

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