Dr. Akhtar emphasized the urgency of addressing the circular debt, which has surpassed 4% of the Gross Domestic Product.
ISLAMABAD: (UrduPoint/Pakistan Point News-Nov 17th, 2023) The caretaker government would increase electricity and gas prices in January as part of efforts to address the lingering issue of circular debt, said interim Finance Minister Shamshad Akhtar.
The move aligned with the International Monetary Fund's Stand-By Arrangement, focusing on reducing costs in the energy sector and enhancing overall efficiency.
During a press conference at the Q Block, Dr. Akhtar emphasized the urgency of addressing the circular debt, which has surpassed 4% of the Gross Domestic Product.
She confirmed that adjustments to electricity and gas rates have already been implemented.
In discussions with the IMF, the finance minister disclosed plans for tariff revisions in the energy sector and the potential imposition of extra taxes on sectors such as real estate and retail. However, she clarified that final decisions on these matters are pending.
Highlighting the necessity of a fresh short-term IMF program, Dr. Akhtar mentioned that Pakistan might pursue a medium-term program, likely under the Extended Fund Facility, once the current Stand-By Arrangement concludes.
Dr. Akhtar also mentioned the expected disbursement of $2 billion in loans from the World Bank during the current fiscal year, contributing to the buildup of foreign exchange reserves.
Addressing the external financing gap, Finance Secretary Imdad Bosal expressed optimism that a successful IMF review would unlock loans from multilateral lenders, including the World Bank, Asian Development Bank, Asian Infrastructure Investment Bank, and Islamic Development Bank. Bosal anticipated a reduction in the current account deficit, leading to a scaled-down external financing requirement.
He further revealed that the processing of program loans from the World Bank and Asian Development Bank, along with co-financing from the Asian Infrastructure Investment Bank, was in advanced stages and expected to be approved in December.
Bosal stated that there is no external financing gap, and the government anticipates improved ratings after the review, potentially attracting foreign loans.
Approval for a $700 million tranche from the IMF is awaited, bringing the total disbursement to $1.9 billion out of the $3 billion under the Stand-By Arrangement.
