More hike in power tariffs opposed: World Bank to extend $2bn loan in FY24

ISLAMABAD: The World Bank (WB), Tuesday, while pushing for a policy shift for sustainable and viable power reforms, has opposed the idea of further increasing the power tariff, saying that the authorities need to reduce line losses and improve recovery.

In a media briefing here, the World Bank’s Regional Vice President for South Asia, Martin Raiser, said that the WB was engaged with the relevant government authorities on various issues aimed at putting the country’s economy on the path of development.

He said that the WB team during the visit has also engaged with all the political parties and discussed the policy-reform agenda

Power sector circular debt swells despite recovery drive

The WB regional VP while talking about the energy sector reform said that the energy sector has hampered Pakistan’s development potential for a number of decades as low tariffs, unpaid bills, power theft, and costly long-term generation contracts have weakened the financial sustainability of the sector and deterred much-needed investment. Instead of fuelling development, the energy sector has been fuelling fiscal deficits and macro instability.

Responding to a question, he said that during the ongoing financial year the WB is to disburse around $2 billion in Pakistan. While commenting on the idea of writing off internal debts, he objected and said one-time writing off loans does not mean core problems will be resolved forever as they will re-emerge.

He said that deferment of local loans may affect the banking sector and investment, so Pakistan has to be careful in the process of deferment of local loans.

The vice president of the World Bank said that before the election, discussions on economic reforms have been held with political parties, the process of economic reforms should continue, and the implementation of economic policies is necessary.

He said that his team has discussed the matters pertaining to pension reforms with the relevant authorities, saying it is a tricky matter but was creating a serious financial burden for Pakistan.

Responding to another question regarding the Special Investment Facilitation Council (SIFC), the WB regional VP said that it was a good imitative of the government to attract global and local investment, but creating a business-friendly environment was more important. He said that Pakistan’s biggest asset was the people of the country, so the government must invest in people and growth reforms must be people-friendly.

The WB officials refused to comment on the Chinese loan pertaining to the China-Pakistan Economic Corridor (CPEC).

Answering a question about the delay in general elections in Pakistan, he said that he was not aware of any such development, adding that elected representatives can easily implement the policy reforms.

Raiser further said that Pakistan has to increase the tax-to-GDP ratio from two to three percent; simply collecting taxes is not enough, there is a need to work together on spending and tax reforms, and increasing tax revenue without providing facilities to the agricultural sector.

While talking about levying taxes on the real estate sector and the agriculture sector, he said that it would be difficult till the productivity of the agriculture sector is increased for which incentives are critical. He said the same is the case with taxing the real estate sector.

He said that the WB has seriously engaged with the relevant government departments, political parties and other stakeholders on the content of reforms keeping in view the past experiences.

Copyright Business Recorder, 2023