ISLAMABAD: Pitching for decade-long political stability and continuity of policies for sustainable economic results, the government on Tuesday promised a series of bold reforms for cheaper and more affordable power rates. It expected official foreign exchange reserves to touch $10bn by June from less than $8bn now.

Speaking at a business conference, Finance Minister Muhammad Aurangzeb said the foreign exchange reserves were expected to cross $9bn as the International Monetary Fund (IMF) released its last tranche in a week and move closer to $10bn by the end of the fiscal year in June—enough for two months of import cover against a low of $3.4bn or 15-day import cover last year.

He said he had already initiated talks with the IMF for a longer and larger programme to bring permanence to macroeconomic stability and execute a key economic structural reform agenda. “We don’t need policy prescriptions; we know the what and why for a long time, we just don’t do it,” he said and promised the execution of outstanding reforms and their sustainability, particularly in the priority areas of power and petroleum sectors and taxation.

On the taxation side, the finance minister pointed out that the gap between policy and enforcement and the large under-taxed and untaxed sectors must be brought into the tax net. He also noted over Rs1.7 trillion worth of tax proceeds pending litigation.

Eyes forex reserves close to $10bn by end-June

He highlighted the importance of timely decisions on these litigations and closer cooperation between the centre and the provinces to bring the untaxed sectors into the tax net. At the same time, he stressed the need to bring most of the state-owned entities (SOEs) to the privatisation counter and sought the wholehearted support of all the line ministries concerned instead of dragging their feet.

The finance minister hoped the Staff-Level Agreement (SLA) with the IMF over the next bailout programme by the end of June or early July and said the fund mission would be arriving in the middle of next month for talks.

Power Minister Awais Ahmad Khan Leghari promised bold reforms leading to an affordable, fair, and cheaper energy supply for all without burdening a few with subsidising others. In this regard, he said the government had started a process for converting imported coal-based power plants to local coal to contain foreign exchange loss, and discussions had also begun with all stakeholders on the weighted average cost of gas.

He said the government was also working on regional incentive packages to spur electricity demand as consumers had started moving out of the grid. He said the Central Power Purchasing Agency (CPPA) had been stopped from entering direct power purchase contracts and would now be replaced with a competitive power procurement system.

National Transmission & Despatch Company (NTDC) would be institutionally restructured quickly, and its role would be changed to power system operator. NTDC’s inefficiencies were causing tremendous loss to the nation, as multiple projects were being delayed for years due to mishandling.

The government is also working on pre-privatisation initiatives for the policy and regulatory framework and minimising the role of power companies in tax collection. If Discos were to work as a tax collection network, then what would the Federal Board of Revenue (FBR) do?

The government has no appetite to control Discos and instead would put them in the hands of competent, efficient, and independent boards of directors through a transparent process. Some of the better-managed entities would be given to the private sector through privatisation, and others would be given on long-term concession agreements for improvement.

The private sector has to take its leadership role through participation in the power sector, particularly the distribution system and the government had asked the Pakistan Business Council to give a few experts on how to phase out distribution companies as they had helped at the time of privatisation of PTCL which opened up the sector and earned hundreds of billions of annual revenue to the government against about Rs20bn or so profit then earned by the PTCL.

Mr Leghari said it would not be logical to hamper the growth of the industrial sector just because certain items needed to be subsidised for all classes. The government must be bold enough to accept social responsibility while fostering industrial growth. One “needs to balance supporting industrial development and ensuring that essential items remain affordable for all segments of society. Also, the government is taking measures to restructure electricity tariffs, and he pointed out that cross-subsidies from the industry were unsustainable.

At one of the sessions, Planning and Development Minister Ahsan Iqbal said peace, stability, and continuity of policies were critical for at least a decade to ensure sustainable economic results. He said Pakistan needed about $70bn repayments over the next three years, and increasing exports to $100bn in eight years would help the country take off economically.

Published in Dawn, April 24th, 2024