ISLAMABAD (Dunya News/Web Desk) – In another move to meet the conditions set by Washington-based International Monetary Fund (IMF), the federal cabinet has approved a whopping increase in electricity base tariff – a move that will further worsen the existing cost of living crisis faced an overwhelming majority and push the cost of doing business towards an unsustainable level.
The federal cabinet, sources say, endorsed the tariff hike proposed by the National Electric Power Regulatory Authority (Nepra), which means the power consumers will pay additional Rs5.72 per unit on average through their monthly bills.
Hence, the average electricity base price has now been fixed at Rs35.50 against the previous level of Rs29.78 per unit, which will be applicable with effect from July 1.
Earlier on Wednesday, Minister of State for Finance, Revenue and Power Ali Pervaiz Malik had told Reuters that Pakistan was looking to clinch a staff-level agreement on an IMF bailout of more than $6 billion this month after addressing all of the lender's requirements in its annual budget.
"We hope to culminate this (IMF) process in the next three to four weeks," he said, while also admitting the budget prepared by Shehbaz Sharif-led coalition government was “tough” and “unpopular”.
Read more: Tough, unpopular budget a stepping stone for IMF programme: Ali Pervaiz
"I think it will be north of $6 billion," he said of the size of the package, though he added at this point the IMF's validation was primary focus.
Earlier, the IMF had pressed the government to increase power and gas tariffs before July 10, as both sides are set to restart talks to finalise the next loan programme.
However, the people are naturally more concerned about the government measures designed to drain out their pockets at a time when their purchasing power is shrinking at an alarming rate.
But it isn’t just the energy tariffs as the government has slapped sales tax on different food items, which will certainly trigger inflationary pressure and may reverse the gains made in easing the consumer price index (CPI).
This fact was highlighted the June CPI which clocked at 12.6 per cent on year-on-year basis against 11.8pc in May, thus ending a five-month long streak of decline.
Read more: Pakistan economy: Inflation in at 12.6pc for June
Month-on-month, the headline consumer inflation, measured by a basket of goods and services rose 0.5pc in June.
At the same time, any increase in inflation may also slow Pakistan’s interest rate cut cycle started by the central bank last month, which saw the policy rates slashed to 20.5pc from a record high of 22pc.
It will be a damaging development for an economy that has been crippled the high borrowing costs.