ISLAMABAD: Adnan Mazarie, chief of the IMF mission for Pakistan, has made it clear to Pakistan that mere tabling of the Reformed GST bill in the National Assembly was not enough and that an integrated Reformed GST had to be implemented across the country for Pakistan to qualify for the fifth review, which in turn was imperative for the release of the 6th tranche of $1.7 billion under the standby arrangement loan of $11.3 billion.
Pakistan needs to get the remaining tranches amounting to $3.4 billion under the ongoing Standby Arrangement loan programme. Mazarie also said the perpetual increase in power tariff was no solution to turn the bleeding power sector into a profit-making entity, rather the solution to power sector ills lies in the true implementation of power sector reforms. The IMF pointman for Pakistan was talking to The News on the sidelines of the Pakistan Development Forum meeting here on Sunday. When asked about the consequences of the provincial governments delaying the tabling and passage of the RGST bills on services, he said: “We are told that provinces are on board.” He said that Pakistan needed to increase its revenue generation base to be able to spend more on health and education sector. Responding to another question, he agreed that the ongoing Standby Arrangement (SBA) loan programme of $11.3 billion would lapse on December 31, 2010. Having said that, he also pointed out that Pakistan had the option to get the programme extended for another three months but emphasised that the remaining two tranches would be released only when the implementation of integrated RGST was started. It is relevant to mention that the IMF programe was virtually under suspension for the last six months as the government has failed to get the Reformed GST on goods passed and the provincial governments have not succeeded in introducing the Reformed GST bills in their respective assemblies.
When Mazarie’s attention was drawn towards the impression of Pakistani masses that the IMF was responsible for the massive raise in power tariff as the Fund had never forced the government to reduce the power theft, line losses and inefficiency, Adnan Mazarie said in clear words that the IMF was not in the driving seat and had no expertise to deal with power sector, rather it was the World Bank and Asian Development Bank, which deal with the power sector and are forcing the government to increase the power tariffs. The IMF chief admitted that in line with the WB and ADB, Pakistan would have to increase power tariff by 2.2 per cent every month till June 2011 despite the fact that 173 million people have already experienced close to 70 per cent increase in power tariff. He said that perpetual increase in power tariff was no solution to turn the bleeding power sector into a profit-making entity. The government, he advised, should focus on the effective implementation of power sector reforms and increase the efficiency, reduce the line losses and power theft as the solution lies in it, not in raising power tariffs. Mazarie said that IMF would, in the interest of the masses, exert pressure on the government to implement the power sector reforms in an effective manner and reduce the line losses and plug the huge power theft so that the government was not compelled to raise power rates.
“If the managerial issues in power sector are addressed and major shift of gas allocation to power sector is ensured apart from reducing the line losses and erasing power theft, then power tariff will tumble to a reasonable level.” Mr Mazarie acknowledged that the business community and traders in the country are totally stressed out due to the incessant increase in power rate. He also mentioned that the government has given huge subsidy (Rs 256b) to the power sector against the budgetary target, which does not align with the power sector reforms. “However, the government placed the cut on education and health which is not commendable”, was another critical jibe that came at the very end and he went on to add, “But it is the choice of the government or the people of Pakistan whether they want subsidies in the power sector or more spending on health and education.” For solution of all economic ills, the IMF mission chief gave the recipe to the government urging it to rationalise and prioritise expenditures and increase the revenue generation base by also including the agriculture and real estate sectors. Commenting upon the newly agreed deficit target of 4.7 per cent with IMF, Mr. Mazarie said the new deficit target needs to be bridged. There are usually two ways to bridge the financing either from foreign sources or from domestic borrowing, he said, adding, “And If the government continues to borrow from the central bank of Pakistan, then the bank will have to go for the printing of currency and this will bring another wave of inflation, that would tax the poor who are already suffering with the existing inflation after the flood-h