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Pakistan Gas Subsidies Cut for IMF Loan-Pakistan faces a hurdle in securing a larger loan from the International Monetary Fund (IMF) – cutting gas subsidies. To unlock this crucial financial aid, the government must eliminate gas subsidies totaling Rs. 129 billion by June 2024.
This significant requirement is part of a series of strict conditions set by the IMF. These conditions aim to improve Pakistan’s financial stability.
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Key Requirements for Pakistan’s IMF Loan:
- Eliminating Gas Subsidies: The government must remove the Rs. 100 billion cross-subsidy for protected consumers and the Rs. 29 billion subsidy for RLNG diversion.
- Transparency and Accountability: A circular debt management plan and an audit report of the Sui Southern Gas Company (SSGC) are required by June 2024.
- Energy Sector Reforms: Transitioning industry-based power plants to the national grid by year’s end and reinstating the weighted average cost of gas (WACOG) system are crucial reforms.
- Fertilizer Sector Impact: The recent elimination of gas subsidies for the fertilizer sector will continue, with a plan to stop supplying cheaper gas from Mari Gas to specific plants.
- Controlling Circular Debt: Biannual gas price reviews are advocated by the IMF to prevent further spikes in circular debt. The government must also submit a revised circular debt reduction plan.
Understanding the Impact:
Cutting gas subsidies can have a two-fold impact. It can ease the financial burden on the government, but it may also lead to higher gas prices for consumers. The IMF’s demands aim for a balance between fiscal responsibility and affordability.
Securing the Loan:
Fulfilling these requirements is essential for Pakistan to secure the new IMF bailout program. The additional funds can provide much-needed financial assistance for the country’s development.