File photo of interim Finance Minister Shamshad Akhtar
Caretaker Finance Minister Shamshad Akhtar on Wednesday made clear that the government lacks the resources for any substantial relief to angry electricity consumers, adding the country cannot afford to deviate from conditions imposed by the International Monetary Fund (IMF).
Addressing the Senate Standing Committee on Finance for the first since assuming office, she emphasized that as an import-dependent country, Pakistan must act responsibly and pass on any surge in commodity prices to consumers. “We do not have the fiscal space or any room for subsidies,” she said, noting this would “hurt” people in the shape of higher fuel and electricity prices.
To a question on providing relief to electricity consumers protesting against hefty bills nationwide, she said the interim government had limited space to function. If the government deviates from commitments to the IMF, she explained, it risked a halt to bilateral and multilateral inflows that were the country’s lifeline. The interim government, after several rounds of “emergency meetings” on the unrest triggered by the past month’s electricity bills, decided earlier this week to approach the IMF with a proposal to stagger the recovery of bills over six months to benefit from lower consumption in winter months. Akhtar clarified that the caretaker setup could not alter any “adjustments” agreed upon between the former government and the IMF. However, she added, the IMF conditions were less concerning than domestic conditions, which she described as “worse” than anticipated.
The interim finance minister stressed that prevailing political and economic uncertainty was the most important issue, adding politicians must resolve this. Further detailing domestic economic concerns, she said state-owned enterprises were causing “unbelievable losses,” adding the next elected government must renegotiate dollar-based fixed rates of returns with independent power producers. “This has been a big mistake and nobody tried to fix it,” she said.
Lamenting the lack of fiscal space, Akhtar noted 70 percent of Pakistan’s tax revenue was spent on interest payments. “Unfortunately, we have done everything to weaken the economy,” she said. To a question on withdrawing free electricity provided to DISCOs’ employees and senior officials, she said the privileges had been in place for decades and cannot be withdrawn at this stage without risking legal action.
Emphasizing that the economy needed a lot of corrective measures, the interim minister said her ministry was tirelessly working on multilateral fronts to deliver. She urged the standing committee to give her one week to give a briefing on the state of the economy and the way forward.
The deputy governor of the State Bank of Pakistan also briefed the committee on rampant inflation. He said it was not demand-driven, preventing interest rate hikes from curbing prices. However, he claimed, higher interest rates had a visible impact on inflationary expectations, which had declined. To a question on devaluation, he said the country was following a market-determined exchange rate policy, adding this could not be deviated from under an agreement with the IMF.
AJK demands
The senate body was also briefed on the Azad Jammu and Kashmir Budget, with AJK P.M. Chaudhry Anwarul Haq personally appearing and calling for steps to address the region’s economic woes or risk unrest from the youth. He lamented that despite producing around 2,600MW of electricity, the region did not even get 350MW for its own needs and urged the government to price electricity for the region at production costs. He also requested the allocation of Rs. 90 billion for AJK under the Federal Divisible Pool.
The committee recommended the government address the reservations expressed by Haq.
During the meeting, various senators expressed concern over ongoing demonstrations against high electricity bills, and regretted the government had yet to play any role to resolve the crisis. PPP Senator Sherry Rehman warned the situation had become critical. “If the people do not pay their bills, it would lead to breakdown of society and that will be embarrassing for the state,” she stressed.
The committee also expressed concerns over the growing dollar instability and the 22% interest rate, noting this was making it challenging for businesses to survive and thrive.