The Government of Pakistan has initiated negotiations with the IMF for another loan. It is expected that the IMF will request the Government to increase electricity and gas rates. IMF has a cadre of experts and decades of experience, yet each time they provide a partial loan, they propose similar measures. However, these intervention measures have not proven effective.
In the case of electricity, instead of raising electricity rates, the IMF should urge the government to terminate contracts with old thermal power plants. Pakistan boasts a 40,000 MW installed capacity, but only 20,000 MW is utilised. The unused capacity incurs high “capacity charges,” driving up electricity rates.
Similarly, regarding gas, rather than raising gas rates to accommodate imported RLNG, the IMF should encourage the government to boost the exploration and drilling of local gas. This approach can also help curb methane gas leakage, a significant contributor to Pakistan’s methane emissions. Currently, only 6-8 drilling rigs are operational, but with IMF support, this number could be easily increased to 50.
To mitigate inflation, the IMF should assist the government of Pakistan in restricting the export of basic and raw food items at low rates, which contribute to high inflation. Instead, only processed food should be eligible for export. This strategy would stimulate the formation of new companies, create jobs, foster higher-value exports, enhance food security, and lower inflation.
With IMF support and the right intervention measures, Pakistan can significantly reduce inflation, lower electricity costs, utilise its gas resources, increase employment, and boost exports. The IMF should prevent the government of Pakistan from borrowing funds for projects that would burden the nation in the future.
SHAHRYAR KHAN BASEER,
Islamabad.
