IMF unimpressed by plan to contain Rs952b circular debt

The International Monetary Fund (IMF) asked Pakistan on Wednesday to plug unbudgeted Rs675 billion power subsidies with a mix of electricity tariff increase and other revenue enhancing measures, while finding serious deficiencies in the revised ‘Circular Debt Management Plan’ (CDMP) of Rs952 billion. During the first review of the revised plan that was prepared by the Power Division, the IMF team also asked Pakistan to withdraw the unbudgeted electricity subsidies for exporters and other sectors, according to sources privy to the ongoing discussions. The Power Division prepared the revised plan to eliminate the Rs975 billion circular debt that it had now projected as against the earlier commitment to the IMF to keep the flow zero. However, the plan did not pass through the IMF scrutiny due to faulty assumptions and heavy reliance on getting Rs675 billion more subsidies. The IMF’s first set of observations may increase the troubles for the government that is eying to satisfy the lender with a mix of tariff increase and additional subsidies. Pakistan’s economic survival hinges on the success of these 10-day long talks after it could not receive any support from foreign nations.