International Monetary Fund and World Bank increase pressure on governments to increase electricity prices

• The International Monetary Fund and the World Bank have increased pressure on the government to increase electricity prices.
• The World Bank linked its US$1 billion credit for energy projects to the increase in electricity prices starting January 1 next year.
• The World Bank delegation told the Prime Minister that he is very sensitive to this issue and is the ultimate authority to make a decision on this issue, a senior official of the Department of Energy said.

Islamabad: The International Monetary Fund and the World Bank have increased the pressure on the Pakistani government to increase electricity prices in early 2022, the next calendar year. news Report.

In recent interactions with senior officials of the Department of Energy, the World Bank linked its US$1 billion credit for energy projects to an increase in electricity prices from January 1 next year.

A senior official of the Ministry of Energy attended a meeting with the World Bank delegation in Islamabad on August 4, 2021. He told news, “And we, the Pakistani authorities, have begun to speculate that the IMF will not extend its new installment payments unless the government raises the electricity price per unit by 2.5 to 3 rupees in one lump sum, or staggers the electricity price in the current fiscal year to June 30, 2022.”

The official added: “The IMF’s US$6 billion plan is currently suspended. There are clear signs that the IMF hopes to increase electricity prices from January 2022. This is one of the prerequisites for resuming the plan.”

On August 4, 2021, in the interaction with the World Bank delegation led by its vice president of South Asia Hartwig Schfer, the World Bank has been insisting on whether the government will raise electricity prices from January or February 2022.

However, the World Bank delegation was told that the Prime Minister is very sensitive to this issue and he is the ultimate authority to make decisions about this, the official said.

The official also argued that the power sector has never allocated subsidies on a practical basis to control revolving debt.

However, Pakistan did not promise to reduce the monthly flow of circulating debt to zero at some point during the remaining two years of the current regime. Earlier, the leaders of the Ministry of Energy, composed of then Energy Minister Omar Ayub Khan and SAPM Nadeem Babar, had claimed that they would reduce the monthly flow of revolving debt to zero by December 2020.

Officials who met with the World Bank delegation stated that the Department of Energy is formulating a revised revolving debt management plan and introduced to the delegation that as part of the revised plan, the government hopes to reorganize or re-describe the revolving debt management plan. Debt service payments for power projects (including CPEC projects) installed in accordance with the 2015 power policy for the next five years.

The World Bank was also told that the government also hopes to readjust the debt service payments of public sector power plants-namely nuclear, hydro, RLNG, and GENCO. EAD obtains loans from lenders at an interest rate of 2% and re-loans to public sector organizations at an interest rate of 12-15%.

The government also mentioned to the World Bank that the government hopes to convert power plants that use imported coal to local coal. The 5,500 MW imported coal-based IPP (and Jamshoro-I) already in production and under construction will be converted from existing Thar blocks 1 and 2 to local coal. The goal is to provide power plants with imported coal worth US$50-60 per ton at a price of US$30 per ton.

The World Bank responded: “We have heard your voice, and you have heard our voice, but our request is to increase tariffs from January 2022.”

This article originally appeared in the daily newspaper on August 9th news. Can visit here.