IMF Strongly Opposes Delay in Increasing Electricity Rates for Middle-Income Consumers

The International Monetary Fund (IMF) has strongly opposed the federal government’s new proposal to delay increasing electricity bills of consumers using 201-400 units per month. Prime Minister Shehbaz Sharif recently suggested postponing the Rs. 7.12 per unit price hike for three months and ordered the Ministry of Energy and the Ministry of Finance to find a solution and secure IMF approval, reported Express Tribune. The IMF has opposed delaying the price hike for middle-income consumers and warned that it would conflict with energy sector targets related to circular debt reduction and annual base tariffs. Approximately 2.8 million residential consumers fall into the 201 to 400 units category, paying significantly more than the average price of Rs. 33 per unit after the recent increase. The government’s decision to increase prices by Rs. 7.12 per unit affects 2.2 million consumers using 201 to 300 units, with a new rate of Rs. 34.26 per unit. For those using 301 to 400 units, the new rate is Rs. 39.15 per unit, excluding taxes and surcharges. The government’s previous decision to defer the increase for up to 200 units benefited a large majority but only for a limited period. Due to policy decisions by the IMF, the World Bank, and successive governments, electricity prices have become unaffordable, averaging Rs. 70 per unit after the recent hike. The IMF had previously rejected Pakistan’s request to spread out August’s electricity bills over six months, reflecting its firm stance against temporary relief measures. The government is also considering ending the provision of free electricity to government officials, bureaucrats, judges, and parliamentarians as part of an emergency plan. The plan may also include ending free petrol and reducing Maximum Demand Indicator (MDI) charges for factories.