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Business Recorder
16-07-2025
- Business
- Business Recorder
Outsourced power: how aid agencies engineered Pakistan's energy bureaucracy?—II
Enter 2025, it was decided that the fundamentally unsustainable power sector could only be saved by putting to waste years of policies and billions of dollars of gas-related investment and infrastructure. At the behest of the IMF, the government imposed a 'grid transition levy' on gas consumption for captive power generation to force industries to the national grid. An Ordinance was rushed to meet the January 31st structural benchmark deadline, and the calculation methodology passed into law yielded a negative levy—because in fact gas-fired captive generation is more expensive than the grid at RLNG prices. A Rs. 791/MMBtu levy was then made up purely to show compliance to the IMF, while captive power plants in the fertilizer and other favoured sectors are being supplied with gas through a private monopoly under Third Party Access without any levy. Outsourced power: how aid agencies engineered Pakistan's energy bureaucracy?—I Meanwhile, captive gas consumption on the Sui infrastructure is down by up to 90 percent YoY and the power sector is refusing to honour its RLNG offtake commitments. This has left the country with 400 MMcf/d of surplus RLNG, forcing $12/MMBtu cargoes to be diverted to domestic consumers at just $4/MMBtu and inflicting up to $378 million in losses on the E&P sector due to curtailment of domestic gas production. In addition, industries' billionsofdollars investments in captive power plants, and the entire ecosystems built around them, have gone to waste. The grid infrastructure also isn't equipped to support the extra load, with frequent fluctuations and disruptions that make any kind of manufacturing impossible and is demanding billions for new connections that won't be energized for three years. The grid tariff of 12 cents/kWh — among the highest in the world — is only the cherry on top. As if shutting off access to gas wasn't enough, a $1.4 billion loan under the 'Resilience and Sustainability Fund' has spawned an equally perverse policy for furnace oil. Primarily used in industrial generators and boilers as an alternative to coal or gas, furnace oil is now treated at part with motor fuels, subject to a petroleum levy of Rs 82,000/ton on a base price of Rs 132,000/ton. In comparison, exports fetch only around Rs 100,000/ton, yet any domestic buyers will have to pay Rs 234,000 per ton, effectively destroying any local market for FO. The net result is that a domestically produced commodity, used for domestic value creation, supporting domestic employment and livelihoods will be sold abroad well below its former domestic price. This puts everyone, except the foreign buyer, at the losing end of the stick. Even the Minister for Petroleum has publicly opposed this levy, only to be shut down by a Finance Ministry evidently subservient to international lenders. As part of the same commitments, a carbon levy has been imposed on motor fuels and furnace oil, starting at Rs 2.5/litre in FY26, ostensibly to incentivize EV adoption with the goal of 30% new passenger vehicle sales being electric by 2030. Never mind, however, that a decent EV in Pakistan costs $35,000 against a GDP per capita of $1,400, and that that there is little local EV production or charging infrastructure to support this goal. Moreover, without transparency as to how the revenue generated form the carbon levy is used towards climate adaptation, the policy is simply where citizens are further extorted to fill FBR coffers while hills are being levelled to build golf courses, disrupting climate systems and exacerbating extreme weather events. This is not to say all foreign aid, grants and loans are bad. There is undeniable value in promoting reform, building capacity and financing clean energy. But when institutions, policy, and even regulation are driven externally, accountability to the citizen suffers. We end up with agencies answerable to donors, not the people. We get complex legal regimes no judge understands, regulatory bodies mimicking western models with no local enforcement, and energy contracts vulnerable to global investor backlash rather than domestic public scrutiny. Pakistan's power bureaucracy, like much of its state, is not homegrown. It is a child—intellectually, legally, and operationally—of DFIs, born of externally driven mandates and orphaned shortly thereafter, only to be replaced with yet another donor-crafted framework. With little organic buy-in or local ownership, each new regime is an experimental sandbox for outside agencies, perpetuating a cycle of pilot projects and policy reinventions rather than sustainable, homegrown reform. And until the people reclaim the space to design, govern, and evolve its institutions based on indigenous knowledge and public accountability, Pakistan's energy landscape will remain trapped in cycles of reform without results. The irony is that while billions have been spent on institution-building, power theft, system losses, and circular debt continue to cripple the sector. Maybe it's time to ask: are the institutions failing because they're Pakistani — or because they never truly were? (Concluded) Copyright Business Recorder, 2025
Business Recorder
20-05-2025
- Business
- Business Recorder
Pakistan FM Aurangzeb holds virtual meetings with UAE banks
ISLAMABAD: Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb on Monday underscored commitment to reforms in talks with United Arab Emirates (UAE) Banks and said that the current economic stability is backed by difficult but necessary reforms. The Ministry of Finance held a series of virtual meetings Monday with three UAE banks, Sharjah Islamic Bank, Abu Dhabi Islamic Bank, and Ajman Bank regarding their support to Pakistan's development and fiscal objectives, said a press release issued here. These meetings were chaired by the Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, and attended by senior officials of the Finance Division and other relevant stakeholders. The Finance Minister thanked Standard Chartered Bank and Dubai Islamic Bank for their valuable role in organizing these interactions and facilitating engagement with potential partners. The Minister also appreciated Asian Development Bank's collaboration and support to Ministry of Finance for supporting Pakistan's fiscal and development goals. In his remarks, he highlighted Pakistan's steady progress toward macroeconomic stability, stating that 'we have come a long way—this year we are on track to close with an year long current account surplus, a primary surplus, and forex reserves approaching USD 14 billion, providing three months of import cover.' He added that inflation has eased to 0.3 percent and the policy rate has also come down significantly, showing a positive outlook for the economy. The Minister emphasized that structural reforms in the country form the basis of this recovery and underscored that the government is firmly committed to long-term reforms, including the restructuring of State-Owned Enterprises, an active privatization program, and rightsizing of the federal government. 'We have broken away from the old boom and bust cycle. The current stability is backed by difficult but necessary reforms—and we are staying the course,' he said. On the revenue side, he shared that Pakistan is set to reach a tax-to-GDP ratio of 10.6 percent by June 2025, with a target of 11 percent in the next fiscal year. The government is prioritizing FBR reforms and end-to-end digitization to broaden the tax base and improve compliance. He also noted that the ongoing progress is backed by the approval of disbursement of the second tranche under the IMF's Extended Fund Facility (EFF) and approval of USD 1.3 billion under the new Resilience and Sustainability Fund (RSF). Pakistan has met all quantitative targets under the IMF program and has also achieved key structural benchmarks, including the introduction of agricultural income tax—a milestone measure in the country's fiscal history. The Minister also referenced the recent improvement in Pakistan's sovereign credit rating by Fitch as a reflection of market confidence. Looking ahead, the Finance Minister emphasized Pakistan's shift towards a productivity- and export-led growth model. He pointed to robust growth in the IT sector, with exports reaching USD 3.4 billion in March, and momentum in the minerals and mining sector. He mentioned that the Reko Diq project has stimulated interest in Pakistan's mining potential, and we aim to leverage copper reserves both for exports and energy transition. During the interactive sessions, senior executives of the three banks acknowledged the progress and shared their comments and views on Pakistan's economic plans. The meeting concluded with mutual interest in continuing the dialogue and exploring potential avenues for collaboration. The Finance Minister reaffirmed Pakistan's openness to quality commercial partnerships that contribute to economic growth, development financing, and investor confidence.
Business Recorder
20-05-2025
- Business
- Business Recorder
Aurangzeb holds virtual meetings with UAE banks
ISLAMABAD: Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb on Monday underscored commitment to reforms in talks with United Arab Emirates (UAE) Banks and said that the current economic stability is backed by difficult but necessary reforms. The Ministry of Finance held a series of virtual meetings Monday with three UAE banks, Sharjah Islamic Bank, Abu Dhabi Islamic Bank, and Ajman Bank regarding their support to Pakistan's development and fiscal objectives, said a press release issued here. These meetings were chaired by the Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, and attended by senior officials of the Finance Division and other relevant stakeholders. The Finance Minister thanked Standard Chartered Bank and Dubai Islamic Bank for their valuable role in organizing these interactions and facilitating engagement with potential partners. The Minister also appreciated Asian Development Bank's collaboration and support to Ministry of Finance for supporting Pakistan's fiscal and development goals. In his remarks, he highlighted Pakistan's steady progress toward macroeconomic stability, stating that 'we have come a long way—this year we are on track to close with an year long current account surplus, a primary surplus, and forex reserves approaching USD 14 billion, providing three months of import cover.' He added that inflation has eased to 0.3 percent and the policy rate has also come down significantly, showing a positive outlook for the economy. The Minister emphasized that structural reforms in the country form the basis of this recovery and underscored that the government is firmly committed to long-term reforms, including the restructuring of State-Owned Enterprises, an active privatization program, and rightsizing of the federal government. 'We have broken away from the old boom and bust cycle. The current stability is backed by difficult but necessary reforms—and we are staying the course,' he said. On the revenue side, he shared that Pakistan is set to reach a tax-to-GDP ratio of 10.6 percent by June 2025, with a target of 11 percent in the next fiscal year. The government is prioritizing FBR reforms and end-to-end digitization to broaden the tax base and improve compliance. He also noted that the ongoing progress is backed by the approval of disbursement of the second tranche under the IMF's Extended Fund Facility (EFF) and approval of USD 1.3 billion under the new Resilience and Sustainability Fund (RSF). Pakistan has met all quantitative targets under the IMF program and has also achieved key structural benchmarks, including the introduction of agricultural income tax—a milestone measure in the country's fiscal history. The Minister also referenced the recent improvement in Pakistan's sovereign credit rating by Fitch as a reflection of market confidence. Looking ahead, the Finance Minister emphasized Pakistan's shift towards a productivity- and export-led growth model. He pointed to robust growth in the IT sector, with exports reaching USD 3.4 billion in March, and momentum in the minerals and mining sector. He mentioned that the Reko Diq project has stimulated interest in Pakistan's mining potential, and we aim to leverage copper reserves both for exports and energy transition. During the interactive sessions, senior executives of the three banks acknowledged the progress and shared their comments and views on Pakistan's economic plans. The meeting concluded with mutual interest in continuing the dialogue and exploring potential avenues for collaboration. The Finance Minister reaffirmed Pakistan's openness to quality commercial partnerships that contribute to economic growth, development financing, and investor confidence.
Zawya
06-05-2025
- Business
- Zawya
IMF to begin 5th review of Egypt's economic programme this week
CAIRO: The International Monetary Fund will begin the fifth review of Egypt's $8 billion economic reform programme, with a team scheduled to arrive in Cairo this week, the IMF said in a statement on Monday. The IMF board approved the fourth review on March 11, unlocking a disbursement of $1.2 billion in a 46-month IMF loan programme first approved in 2022 and later expanded following the outbreak of fighting in Gaza. Egypt had been suffering from a severe shortage of foreign currency and inflation that peaked at 38% in September 2023. The IMF has yet to publish a staff report from the fourth review, saying the Egyptian authorities needed more time to consider its publication. The IMF team is expected to begin its visit on Tuesday and remain in Cairo until May 16, a person familiar with the mission said. The IMF board in March also approved an additional $1.3 billion in financing under its Resilience and Sustainability Fund. In the fourth review, the IMF board approved a request by Egypt to waive its primary budget surplus target. The surplus was expected to reach 4% of GDP in the fiscal year that will begin on July 1, 0.5% less than Egypt had committed to earlier in the programme. (Reporting by Patrick Werr, Writing by Menna Alaa El-Din, Editing by Chris Reese and David Gregorio)
