As people in Pakistan are already crushed by rising energy prices, the International Monetary Fund says recent increases in electricity and gas tariffs were important to shore up energy sector viability, but broader reforms are still needed to tackle the structurally.
The IMF in a report on the first review of the stand-by arrangement says the caretaker government took significant action in the power and gas sectors to stem the rise in circular debt, which, combined, reached approximately 5.25 percent of GDP by the end of last fiscal year 2022-23.
Moreover, energy subsidies are also limited to Rs976 billion in the 2023-24 budget, the report mentions – the reason why the power and gas tariffs have jumped to record-high levels, triggering a cost of living crisis and unparalleled cost of doing business.
Timely implementation of scheduled tariff adjustments and broader reform efforts are critical to restoring energy sector viability, the IMF notes.
As far as the gross domestic product (GDP) is concerned, the IMF has predicted a 2pc growth rate for the current financial year ending on June 30 and cited an improvement in foreign reserves from $4.2 billion to $8.2bn.
However, the agriculture sector witnessed a 5.1pc, the IMF said, adding that Pakistan’s economy was moving in the right direction.
The IMF also welcomed the improved revenue collection which, it said, helped arrest the widening deficit and said Pakistan has also taken the required steps to stop cross-border smuggling of US dollars.
Pakistan’s budget deficit would be around 7.6pc of GDP, the IMF forecast says, with the current account deficit hovering around 1.6pc of the GDP.
