Muhammad-Aurangzeb-copyThe government is planning to lower electricity costs as part of a broader plan to bring relief to manufacturers and increase exports, in a move that comes shortly after reaching an agreement to unlock more cash from the International Monetary Fund.
The government plans to soon make an announcement to lower electricity tariffs, Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb told Bloomberg in an interview on the sidelines of the Boao Forum in China. That goes along with other efforts to lower financing costs and taxation burdens to help the manufacturing sector boost output, and overseas sales, he said. “Fundamentally, the DNA of the economy has to change to make it export-led,” Aurangzeb said. “On the energy side, we are working under the prime minister’s leadership to bring the tariffs down and the prime minister is going to make an announcement around that in the coming days.”
Electricity bills have tripled for some people in Pakistan over the past few years, which has hurt consumption and made manufacturing less competitive regionally.
Prime Minister Shehbaz Sharif’s plans to reshape the tattered economy received a boost Wednesday when the IMF agreed to provide $2.3 billion to Pakistan in two separate loans as it seeks to recover from a dollar shortage that brought the nation to the brink of collapse in 2022.
The government is currently putting together a budget that broadens the tax base by including sectors such as real estate, retail and agriculture, Aurangzeb said. That could allow officials to reduce the burden on the manufacturing sector, which has been paying disproportionately high taxes, he said. The State Bank of Pakistan has already dropped its key policy rate to 12% from 22% last April, but unexpectedly this month held its benchmark rate. Aurangzeb said that while policy rates are the purview of the central bank, he sees more room for them to come down later this year.
“Given where the headline inflation is, where the core inflation is, I do expect that during this calendar year we’ll see rates coming down further,” he said. In the fourth quarter, Pakistan plans to launch its first Chinese Yuan-denominated bond in the range of $200 million to $250 million to fund climate-related projects, Aurangzeb said. While Pakistan is already heavily indebted to China’s development banks for infrastructure projects, it’s important for the country to diversify its funding bases beyond the US, Europe and Islamic sukuks, he said.
“It is about time that we now tap the second-largest and deepest capital market in the world,” Aurangzeb said.