Islamabad: The IMF has demanded that the Punjab government terminate its subsidy of 14 rupees per unit on electricity bills by September 30, 2024. This demand comes alongside three new conditions imposed for the new loan program, which could jeopardize Punjab’s 700 billion rupee solar panel distribution initiative.
According to official sources, following Punjab’s announcement of a two-month, 14-rupee-per-unit electricity subsidy, the IMF has introduced stringent conditions for provincial governments. These conditions stipulate that no provincial government can offer such subsidies during the IMF’s 37-month, 7 billion dollar loan program.
One of the new conditions requires provinces to agree not to provide any subsidies on electricity and gas. This undermines previous claims that provinces could offer electricity subsidies and raises questions about Prime Minister Shehbaz Sharif’s encouragement for other provinces to follow Punjab’s example.
Another condition obliges provincial governments to ensure that no policy or measure undermines or contradicts the commitments made under the 7 billion dollar program. This condition significantly limits the financial autonomy of the provincial governments.
Provinces have committed to signing the National Financial Agreement by the end of September to assume some of the federal government’s expenditures. They have also pledged to improve agricultural income tax, property tax, and sales tax on services.
Due to the new conditions aimed at maintaining these commitments, provincial governments can no longer implement unilateral measures. The third condition mandates that provinces consult with the Ministry of Finance before introducing any action that could impact or diminish the IMF’s agreed structural benchmarks and key measures.
Unlike previous instances where provincial policies and budgets received less scrutiny, the IMF’s new program covers the budgets and policies of all five governments. The Ministry of Finance is seeking a date for the IMF Executive Board meeting to approve the 7 billion dollar loan program.
This week is deemed crucial for the approval of new loans and rollovers. Sources indicate that the IMF is critically reviewing provincial budgets and has noted that revenue estimates in Punjab and Sindh may be overly optimistic, potentially complicating efforts to meet cash surplus targets.
Punjab Faces IMF Pressure on Electricity Bill Relief and Solar Projects
