While Pakistan’s economic team was still in Washington holding talks with the IMF, hikes in bother power and petroleum prices were announced. It appears that Pakistan’s negotiators failed to convince the Fund, which they had hoped to do, that Pakistan deserved concessions for having been badly hit by the third wave of the coronavirus. The team also failed to persuade the IMF of the feasibility of its alternate measures to reduce circular debt without tariff increases. Earlier the IMF staff had considered Pakistan’s power sector circular debt management plan to be ‘un-bankable’ without sufficient tariff increases. Was it the weakness of Pakistan’s stand or lack of a supportive gesture from the Biden Administration that led to the failure of Pakistan’s mission?
The people of Pakistan have been administered a virtual electric shock by the raising of the base power tariff by Rs1.39 per unit on Saturday. After power rate hikes in January, February and earlier this month this is the fourth power tariff rise in a year. As usual the ruling PTI has blamed the previous government for agreements with independent power producers (IPPs), forcing the country to rely on imported fuels for power generation and also creating the issue of capacity or compulsory payments. The government however conveniently forgets its fumbling the business of LNG imports by purchasing the most expensive LNG ever to be imported by the country. The latest price hike will have a devastating impact on 46 percent of the consumers, the bulk of whom belong to lower middle class.
The big price increase in petroleum products has for the first time taken the price of all the four major petroleum products above Rs100 per litre. The hike will raise the prices of everything whether produced in fields or factories or imported from abroad. The price of petroleum products is no doubt on the rise globally. But the decline in the value or the rupee on account of the government’s policies has made petroleum imports even more costly.
The rise in power charges and hike in petroleum prices will have political fallout. Even some of the die-hard followers of Prime Minister Khan are already having second thoughts about his promises about the rise of the rupee and good days coming.
