The International Monetary Fund (IMF) has imposed three new conditions on its latest loan program, demanding the Punjab government end its Rs 14 per unit electricity subsidy by September 30. According to a report by The Express Tribune, this move also jeopardizes Punjab’s Rs 700 billion plan to provide solar panels to consumers in installments.
The IMF’s new conditions come after Punjab announced a temporary subsidy of Rs 14 per unit on electricity bills for two months. Under the IMF’s 37-month, $7 billion loan program, no provincial government can offer such subsidies. This restriction also challenges Prime Minister Shehbaz Sharif’s recent encouragement for other provinces to follow Punjab’s example.
Additionally, the IMF’s conditions require that provincial governments not introduce any policies or measures that contradict the commitments made under the loan program. This provision limits the financial autonomy of the provincial governments.
The IMF has also stipulated that provincial governments sign a National Fiscal Agreement by the end of September to share some of the federal government’s costs. They must also improve agricultural income tax, property tax, and sales tax on services.
Under the new conditions, provincial governments must consult with the Ministry of Finance before taking any actions that could affect the structural standards and key measures agreed upon with the IMF.
This new IMF program now includes oversight of five provincial budgets and policies. The Finance Ministry is seeking a date for the IMF Executive Board meeting to approve the $7 billion loan program. This week is crucial for the approval of new loans and rollovers, with the IMF critically reviewing provincial budgets and expressing concerns about high revenue estimates in Punjab and Sindh, which could impact their ability to meet cash surplus targets.
