IMF Approves Pakistan’s Plan to Lower Electricity Tariffs

In a significant development, the International Monetary Fund (IMF) has granted approval for Pakistan to reduce electricity prices by Rs1 per kilowatt-hour for all consumers.

This reduction, aimed at alleviating financial strain on households and businesses, will be funded through a levy imposed on captive power plants utilizing natural gas, according to an IMF statement.

The initiative is part of the government’s broader efforts to introduce relief measures for electricity consumers. Officials estimate that this adjustment could collectively save consumers up to Rs100 billion. For a household consuming 500 units per month, the new plan would provide a Rs500 reduction in their electricity bill.

The IMF emphasized that this move aligns with Pakistan’s ongoing energy sector reforms. The approval follows a recently concluded staff-level agreement between Pakistan and the IMF, unlocking access to an additional $1 billion under the Extended Fund Facility (EFF).

Pakistan’s economy has shown signs of improvement, with inflation reportedly hitting its lowest level since 2015. Authorities anticipate that the IMF’s executive board will approve the disbursement of the EFF’s second tranche of $1 billion and a new $1.3 billion Resilience and Sustainability Facility (RSF) by late April or early May.

However, the release of the $1.3 billion will be staggered over 28 months and contingent upon Pakistan fulfilling around 13 conditions, including the implementation of a carbon levy.

FAQs:

1. How much will electricity tariffs be reduced in Pakistan?
   The approved reduction is Rs1 per kilowatt-hour for all electricity consumers.

2. How will the government finance this relief?
   The relief will be funded through revenue collected via a levy on captive power plants that use natural gas.

3. When will the reduced tariff come into effect?
   While an exact date has not been announced, it is expected to be implemented soon as part of ongoing economic reforms.

4. What is the expected financial relief for consumers?
   Consumers could collectively save up to Rs100 billion, with a household using 500 units monthly benefiting from Rs500 in savings.

5. What conditions has the IMF set for additional funding?
   Pakistan must meet around 13 conditions, including the implementation of a carbon levy, to access the full $1.3 billion under the RSF.