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IMF unhappy over huge subsidy to power sector

11 January, 2013

ISLAMABAD: International Monetary Fund has once again reportedly shown unhappiness over huge subsidy given to the power sector during the ongoing financial year 2012-2013.

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ISLAMABAD: International Monetary Fund has once again reportedly shown unhappiness over huge subsidy given to the power sector during the ongoing financial year 2012-2013. IMF team is of the view that budget deficit would get out of control if current pace of releasing funds for power sector continued in next few months.

Sources informed that Pakistan and IMF have reportedly discussed the power sector issues on the third day of the technical talks under Post Programme Monitoring here in Islamabad. The government officials briefed the Fund on power sector of the country including subsidy and measures taken to reform this sector.

The IMF was informed that government has provided subsidy worth of Rs 170 billion to the power sector during the first six months (July-December) of the ongoing financial year against the overall allocation of Rs 185 billion for the whole year. Sources said that IMF team said that power subsidy would go beyond Rs 300 billion at the end of June 2013 if current pace of releasing funds for power sector continued in next six months that would increase the country's fiscal deficit. The government has target to keep budget deficit at 4.7 per cent of the GDP during current fiscal year.

Sources said that IMF the other day noted that Pakistan could not achieve the revenue collection target, GDP target and inflation rate target for the current financial year. Similarly, the Fund noted that Pakistan is unlikely to achieve the fiscal deficit target of 4.7 per cent due to low revenue collection and huge power subsidy. Similarly, it has estimated that inflation will remain in double digits and will be around 11 percent in the ongoing fiscal year due to heavy borrowing of the government to finance the budget deficit.

Meanwhile, the IMF delegation called on Finance Minister Dr Abdul Hafeez Sheikh. Advisor to the finance ministry and spokesperson Rana Assad Amin informed The Nation that policy level talks between Pakistan and IMF would start from Monday or Tuesday next week. He further said that State Bank of Pakistan, Federal Board of Revenue and Ministry of Finance are briefing the Fund on macroeconomic situation of the country.

Post Programme Monitoring mission of the International Monetary Fund (IMF) is reviewing Pakistan's capacity to repay the loans. Post Programme Monitoring mission of IMF reviews Pakistan's capacity to repay the loans after every six months.

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