• SIFC takes long-term policy decisions in six-hour meeting
• Caretaker govt says committed to global agreements amid economic challenges
• Shamshad highlights foreign exchange management as top priority, expects $6bn cumulative inflows this fiscal
• New policy move to connect industries to power stations

ISLAMABAD: Still reeling from nationwide protests against inflated electricity bills of peak summers, the caretaker government on Friday said that increasing gas rates “across the board” ahead of winter was inevitable to contain the gas-sector circular debt growing at the rate of Rs350 billion per year. The government said it also intends to revitalise an economy that’s seen months of decline due to strict import regulations.

At a news conference, key ministers of the interim government also emphasised long-term policy decisions, vowing to uphold all international agreements while preventing their misuse against national interests.

They said the industries would be directly linked to power stations through wheeling charges, a move that may further add to the low recoveries and circular debt of the power distribution companies (Discos).

This was the crux of the marathon six-hour first session of the two-day proceedings of the civil-military Special Investment Facilitation Council (SIFC), which also decided to open up imports across the board to facilitate exports, job creation and economic activities affected by months of import restrictions amid low foreign exchange reserves.

Caretaker Prime Minister Anwaarul Haq Kakar presided over the meeting, also attended by the army chief. The SIFC will continue its second round on Saturday (today) to reach decisions and formal announcements, according to a news conference jointly attended by four cabinet ministers — for finance, commerce, power, and information.

In response to questions about the strength of the economy to withstand foreign exchange requirements of a possible import splurge, Finance Minister Dr Shamshad Akhtar said fresh inflows from multilaterals were expected to be around $6bn during the year on the basis of ongoing discussions with the multilateral agencies like the World Bank, Asian Development Bank and International Monetary Fund and besides the anticipated rollover of deposits from friendly countries on maturity. “The situation is reasonably okay for now,” she said.

Information Minister Murtaza Solangi said the SIFC focused on three key sectors of potential investments, including information technology, mining and agriculture, but also discussed measures to contain government expenditures and circular debt, implementation of decisions of the previous government for privatisation, reforms in the Federal Board of Revenue, removal of roadblocks to foreign direct investment and improvement of performance of loss-making state-owned entities and their privatisation.

Mr Solangi said while the major decisions would be announced on Saturday, the meeting also discussed the menace of smuggling in the country, including those of commodities, petroleum products and foreign exchange. He said the SIFC decided to honour all the international agreements and examined to stop the misuse of those international agreements, causing irreparable loss to Pakistan.

Gas tariff

The caretaker minister for power and petroleum, Muhammad Ali, said the meeting decided to offer an incremental tariff for industries to increase their electricity consumption in winters when demand was set to drop significantly so that losses do not increase in capacity payments due to low utilisation.

The meeting also discussed ways to improve theft control and governance structure in Discos besides their privatisation and provincialisation and ultimately reduce their prices.

He said the industries would be provided power supply from generation plants directly through wheeling charges.

In the gas sector, he said the situation was very alarming as it faced Rs350bn loss per year. Going up by Rs1 trillion in the last four years, the gas sector’s circular debt, including interests, had piled up to Rs2.7tr and was growing very fast.

“Therefore, the gas price has to be rationalised,” he said. “The government would have to revise gas prices across the board because we cannot bear the $3.5bn loss” that Pakistan suffered for a decline in domestic exploration of oil and gas.

Revival ‘direly needed’

Dr Shamshad Akhtar said Pakistan direly needed to revive the economy for which it was necessary to remove import restrictions across the board since Pakistan was an import-intensive country.

Asked if she agreed with the timing of opening up imports, as suggested by her cabinet colleague Commerce Minister Gohar Ijaz and taking in mind the tight foreign exchange situation, Dr Akhtar said that managing foreign exchange reserve was a “very high priority for us and we are closely monitoring the situation”.

She said the government was in contact with lenders so that inflows are brought in time and “we will also go for the rollover of deposits that we have in place right now on their maturity”.

Commerce Minister Gohar Ejaz said that Friday’s SIFC meeting also focused on strategies to bolster the viability of industries, citing supply chain shortages as a significant driver of inflation.

He said the government efforts over the past due to foreign exchange constraints had created a shortage of raw material and resultantly exports also suffered.

Inflation could only be effectively managed by augmenting exports, he said, suggesting that by reviving the export industry, the burgeoning dollar price of Rs300 could potentially decrease to Rs250, simultaneously mitigating inflation.

Published in Dawn, September 9th, 2023