Govt Won’t Give Fuel Subsidy on IMF Demand

The federal government has vowed to the International Monetary Fund (IMF) not to give any new fuel subsidies next fiscal year. Authorities have committed to protecting low-income consumers, avoiding new subsidies, and refraining from netting out cross-arrears without proper auditing. They also aim to reduce circular debt through reforms in the fiscal year 2024-25, reported Business Recorder IMF has emphasized the need for regular tariff adjustments and broader reforms to restore energy sector viability. While recent actions stabilized circular debt, cost-side reforms are essential for the long term. Notably, circular debt in the energy sector stabilized in late 2023 and early 2024. While still high and dangerously unsustainable, the power circular debt has remained at Rs. 2.6 trillion. Gas tariffs saw a significant increase in February 2024, maintaining a progressive rate structure to protect residential consumers while increasing prices for industries. With continued anti-theft measures and budgeted subsidies, authorities aim to meet their circular debt management plan target for the fiscal year. The government aims to prevent further circular debt accumulation by notifying timely tariff adjustments and implementing reforms in the energy sector, including improving transmission infrastructure, enhancing DISCO performance, and transitioning captive power demand to the grid.