According to newspaper reports, the International Monetary Fund (IMF) has apprehended that implementation of structural reforms in power sector are facing political and legal challenges. In its eighth review under the extended arrangement and on Pakistan’s request to waive performance criteria, the two sides focused their topics of discussions on the issues related to the energy sector, including imposition of power surcharges coupled with allocation of 0.1 percent of GDP in the current fiscal budget to reduce part of the circular debt. Though the government has missed the indicative target at the end-June 2015 on the flow of power sector arrears by Rs 15 billion, it recovered the projected collections and managed to achieve the September target. The fund has asked the government to align the business plans of the power distribution companies with the arrears reduction plan, including a proposal to set a new bench mark for quarterly loss reduction, revenue collection and recovery targets for each DISCO by mid-October 2015.
On another note, the Privatization Commission is exploring new ways and means to ensure participation of private sector in thermal power generation besides keeping the option open for privatization of the power sector. The government has also launched a roadshow in the United States to create awareness about privatization of power sector in Pakistan and invited the foreign investors to exploit the opportunities in the energy sector. The World Bank and the Asian Development Bank have jointly stressed the need for an alternative plan to keep up revenue generation in the electricity sector in case of legal challenges. The government is facing pressure from various donor agencies to enhance power tariff to neutralize the effects of losses in power generation and its distribution. The government has already brought utility bills to new heights and it is becoming harder and harder for common man to make both ends meet. Hundreds of industrial units have been closed down and the worst part of the IMF program is that the power outages and the business climate will continue to restrain competitiveness and growth in the country despite enhancement in the power tariff.
The government has started implementing a time-bound strategy to deal with price distortions and other issues with the help of international partners. There is a need to expedite work on the hydropower projects and promote policies to attract local and foreign investment in power generation. Unfortunately, the government is facing various challenges one after the other since it came to power, but it seems it lacks the crisis management team to deal with the situation.