Ahmed Jaffer’s Post

"There has been a growing distrust between Pakistan and China relating to economic engagements, which can complicate the power negotiations," said Khalid Rahman, chairman of the Institute of Policy Studies, an Islamabad think tank. While Pakistani ministers are focusing on Chinese power producers, pressure is building on the government to renegotiate agreements with all local and foreign independent power producers (IPPs) in Pakistan. Experts agree that the IPPs are taking their toll on Pakistan's economy. "There is no doubt that capacity payments, due to IPP deals, are one of the contributing factors to inflated power bills in Pakistan and are also propelling social unrest," said Rahman from the Institute of Policy Studies. - Pakistan under pressure to renegotiate hefty Chinese power deals - NIKKEI Asia | July 26, 2024 https://lnkd.in/dN5YT5a4 #IPPs #IPS #Energy #Economy #PowerSector #Pakistan

Pakistan power sector has been so designed to make electricity more & more expensive in coming years with no signs of respite. Although all furnace oil IPPs installed in 1990s have completed their useful age & their PPA's expired but they are "not being retired" as it's benefits our ageing refineries, who pay hefty kick backs to people in power sector. On other hand all projects approved since 2014 generate expensive electricity as they are based on imported coal and LNG (costs Rs.30+/Kwh). The new run-of-river hydro electricity projects have Tariff of Rs.22/kWh. Only solution for Pakistan is to add 10,000 MW of cheap Rs.12/kWh wind and solar electricity, for which there is NO POLICY.

The visiting IMF team has informed Pakistan's authorities that the next bailout package under the Extended Fund Facility (EFF) will be considered only after the upcoming budget is aligned with IMF directives and approved by parliament. This agreement could lead to formal negotiations and a staff-level agreement by July 2024, potentially augmented by $6-8 billion in climate finance. The government must demonstrate its capacity to raise FBR revenue, generate a primary surplus through expenditure cuts, and implement structural reforms to minimize SOE losses. Key requirements include hiking electricity and gas tariffs in July and August 2024. During ongoing talks in Islamabad, the IMF gathered data on major economic fronts and outlined expectations for the 2024-25 budget. The government will need to increase the tax-to-GDP ratio, which may fall to 9% this fiscal year, and collect over Rs12 trillion in the next budget, up from an anticipated Rs9 trillion. Non-tax revenue targets will also rise, with a carbon levy under consideration. On the expenditure side, SOEs, pensions, and subsidies must be rationalized, and federal development projects with provincial scopes will be abandoned. The IMF demands higher power tariffs via baseline, fuel price adjustments, and quarterly tariff adjustments, alongside increased gas tariffs. Additionally, solar net metering will be independently reviewed due to its impact on DISCOs' grids and the power sector's fiscal challenges. A top official expressed concerns over front-loading the next IMF package, citing the need to protect the social fabric amid persistent high inflation. #pakistaneconomy #imf #bailout #eff #budget2024

Circular Debt and High Tariffs: Pakistan's Power Sector on the Brink 😡 😱 😰 😭 The Pakistan power sector's dismal performance over the past 30 years, especially in the last three, is a glaring failure of governance, corporate mismanagement, and elite neglect. Despite repeated promises, neither the government nor Independent Power Producers (IPPs) have tackled the deep-rooted inefficiencies, theft, and corruption that have crippled the energy sector. Instead, ordinary citizens, particularly low-income households, are forced to shoulder the burden of skyrocketing electricity prices, now averaging between Rs64 and Rs72 per unit, higher than in wealthy nations like Norway. This blatant mismanagement has dragged millions into permanent poverty, crushing household economies. The ruling elite and IPPs continue to profit, while circular debt spirals to unprecedented levels, projected to hit Rs2.8 trillion by the end of this fiscal year. Rather than addressing structural inefficiencies or investing in reforms, the government resorts to increasing tariffs, exacerbating the financial hardships of already struggling citizens. The lack of accountability and vision has rendered electricity unaffordable for many, all while circular debt surges, pushing the country closer to financial catastrophe. The power sector's failures are not only an economic crisis but a moral indictment of Pakistan’s leadership and corporate stakeholders.😡 😱 😰 😭 #PakistanPowerCrisis #EnergyFailure #ElectricityPrices #CircularDebt #PowerSectorMismanagement #EconomicInequality #IPPMismanagement #GovtFailure #EnergyReformsNow #LowIncomeStruggles #PakistanElectricityCrisis

Revenue, subsidy, inflation: Key fiscal concerns for Bangladesh govt The finance ministry anticipates a challenging fiscal year ahead with key areas of concern that include meeting revenue targets, addressing subsidy arrears in power, gas, and fertiliser, and controlling imported inflation. The ministry proposed several strategies to address these challenges, such as gradually transitioning gas and electricity prices to a market-based system and maintaining modest austerity measures to reduce outstanding subsidies. On 13 May, the Finance Division briefed the prime minister about these challenges and proposed actions to address them, according to finance officials. Other challenges highlighted by the ministry are the slow implementation of priority projects due to funding shortages, delays in education and health projects and the need for policy reform and better business conditions to boost investment.

The IMF stands ready to send its mission to Pakistan after the formation of a new cabinet under the $3 billion Standby Arrangement (SBA) programme. In a press briefing held at the IMF headquarters in Washington, DC, on Thursday. Fund’s Communications Director Julie Kozak said that on January 11, the IMF Executive Board approved the first review of the Stand-by Arrangement with Pakistan, bringing total disbursements under the Stand-by Arrangement to about $1.9 billion and the SBA supported programme underpins the authority’s efforts to stabilise the economy with a strong emphasis on protecting the most vulnerable segments of the population. During the period of the caretaker government, the authorities maintained economic stability through strict adherence to the fiscal targets while protecting the social safety net, maintaining a tight monetary policy stance to control inflation and continuing to build foreign exchange reserves. And this has been done at the same time as implementing timely adjustments in tariffs to shore up the viability of the energy sector. The IMF stands ready to hold a mission for the second review of the Stand-by shortly after a new cabinet is formed. The focus, therefore, is currently on completion of the current Stand-by programme, which ends in April 2024. “We look forward to working with the new government on policies to ensure macroeconomic stability,” added the spokesperson. #pakistaneconomy #imf #sba #loan #energysector #election2024

Pakistan has proposed a plan to the International Monetary Fund (IMF) to lower electricity prices by Rs6 per unit by injecting Rs2.8 trillion. However, this proposal relies on risky funding methods and may not receive immediate approval from the IMF. The federal government has stated that Rs1.4 trillion of the total amount will come from all four federating units, including Khyber Pakhtunkhwa (K-P). However, the Pakistan Tehreek-e-Insaf (PTI)-led K-P government has rejected its contribution. Discussions between the IMF and Pakistani officials on this Rs2.8 trillion plan took place over the weekend, but no conclusions were reached. The IMF has requested additional details. The government has proposed to reduce the electricity prices by Rs5.80 per unit by changing terms of local and the government-owned power producers, closing some inefficient plants and retiring Rs2.7 trillion debt. #ElectricityPrices #IMF #FundingChallenges #EnergySector #PakistanPolitics #PowerTariff #GovernmentPlan

Pakistan has proposed a plan to the International Monetary Fund (IMF) to lower electricity prices by Rs6 per unit by injecting Rs2.8 trillion. However, this proposal relies on risky funding methods and may not receive immediate approval from the IMF. The federal government has stated that Rs1.4 trillion of the total amount will come from all four federating units, including Khyber Pakhtunkhwa (K-P). However, the Pakistan Tehreek-e-Insaf (PTI)-led K-P government has rejected its contribution. Discussions between the IMF and Pakistani officials on this Rs2.8 trillion plan took place over the weekend, but no conclusions were reached. The IMF has requested additional details. The government has proposed to reduce the electricity prices by Rs5.80 per unit by changing terms of local and the government-owned power producers, closing some inefficient plants and retiring Rs2.7 trillion debt. #FederalGovernmentPlans #GovtPlans #FederalInitiatives #GovernmentStrategies #FederalPolicy #GovernmentProjects #FederalPlans2024 #GovtDevelopment

Pakistan has allocated substantial funds towards state-owned enterprises in the power sector since FY13, resulting in significant subsidies that have a profound impact on the national accounts and hinder industrial growth. The country's fossil fuel subsidies for consumers peaked at $25 billion in 2022, often benefiting the wealthy more than the impoverished due to their non-targeted nature. Redirecting these federal subsidies towards more effective industries could enhance industrial performance and bolster long-term tax revenues. Despite Pakistan's industrial tariff reduction plan aiming to alleviate burdens on industries by 91%, the IMF vetoed its implementation due to perceived risks. Additionally, the IMF has persistently advocated for the cessation of gas and electricity subsidies for consumers, yet Pakistan has struggled to address its debt issues effectively. #EmpoweringPakistanWithData #OICCI #news #economy #electricity #SOEs #subsidies

If the #subsidy rationalisation is done in stages it will have only a small impact on #inflation which has actually been falling for many months. So any effect should be minimal and gradual and the targeted subsidies on low-income groups through the Padu database will raise their income and help them cope. Thanks to Birruntha Subramaniam at The New Straits Times Press (Malaysia) Berhad for this #subsidies #economy #socialprotection https://lnkd.in/grJRwS6s