Pakistan has been given permission by the International Monetary Fund (IMF) to postpone paying energy bills for customers who use up to 200 units over a three-month period. Pakistan must declare a 50% increase in gas prices in return and launch a crackdown on electricity theft.
This agreement is currently awaiting approval from Caretaker Prime Minister Anwaarul Haq Kakar and his cabinet, according to reliable sources.
For customers who don’t qualify for subsidies and use up to 200 monthly units of electricity, the IMF has provisionally approved a three-month payment schedule for their August electricity bills. Users of lifelines or those who are exempt from price increases will not have access to this flexibility, though.
Despite the government’s request for a general relief program for customers using up to 400 units being rejected, sources claim that customers using up to 200 units will now be able to pay their bills in installments. This relief will be valid for the August 2023 billing cycle. Additionally, there won’t be a 10% extra fee for late payments of bills. The Federal Cabinet and the Prime Minister must still give their final approval for this measure before it can be implemented, which could benefit 4 million electricity users.
The IMF initially rejected the government’s request to spread out payments for bills up to 400 monthly units, which would have covered 81 percent of all consumers.
In exchange, Pakistan is required to simultaneously launch an investigation into power theft, increase bill recovery rates, and—most importantly—increase gas prices.
The Oil and Gas Regulatory Authority has already set new gas prices, which Pakistan has been encouraged to implement while they wait for approval. In order to fully recover the cost of imported gas from consumers, the lender has also directed the use of the weighted average cost of gas (WACOG) method. This would entail figuring out the cost of gas by accounting for both domestic and imported LNG prices, estimating an average price, and then adjusting consumer-specific prices in line with that estimate.
Pakistan has also been urged by the IMF to improve efficiency by putting a stop to electricity theft and collecting back arrears.
Notably, improved recovery initiatives in the gas and electricity industries may lessen the need for revolving credit, enhancing the viability of these vital services.