Latest news with #Rs50bn
Business Recorder
26-05-2025
- Business
- Business Recorder
Pakistan FY26 budget may envisage Rs1.079trn power subsidy
ISLAMABAD: The government is likely to earmark an amount of Rs 1.079 trillion subsidy for the power sector for the fiscal year 2025-26 against Rs 1.190 trillion for FY 2024-25, well informed sources in Finance Division told Business Recorder. These figures have been finalized in recent meetings between the government's economic team and International Monetary Fund (IMF) Mission. Finance Division has also conveyed revised provisional Indicative Budget Ceilings (IDCs) of Rs 636.136 billion for sector subsidy on account of recurrent budget for 2025-26. Earlier, this amount was Rs 400 billion. Extra subsidy needs: MoF asks ministry to allocate Rs50bn for PD to secure TSG Since details of revised amount of subsidy for power sector for FY 2024-25 are not available it is not known if entire allocation has been consumed by the Power Division or there was some deviation. Finance Division has also asked Power Division to comply with mandatory instructions strictly and fully by all Principal Accounting Officers (PAOs), heads of departments and bodies /entities while preparing budget estimates for each cost centre and head of accounts. The following instructions have to be followed :(i) PAOs are required to comply with the provisions of the PFM Act, 2019 regarding performance-based budgeting and expenditures by formulating well defined plans; (ii) guidelines and procedures contained in Financial Management and Powers of PAOs Regulations, 2021 and the BCC for FY 2025-26 shall be adhered to ;(iii) ensure adoption of Single Account (TSA) as per Section 30 of the PFM Act, 2019 read with Cash Management & TSA Rules, 2024; (iv) for Climate Sensitive Budgeting / Green Budgeting the information has to be filled for both current and development budget as per the typology defined in Form-IV. The cost centres related to green component shall also be identified while submitting the BOs/NISs; (v) KPIs related to gender and climate may also be identified separately in Performance-Based Budge-ting (Form-1); (vi) PAOs, Heads of Departments and Bodies / Entities shall submit quarter-wise budget estimates for FY 2025-26; (vii) PAOs shall make expenditures keeping in view the budgetary allocations without any assumption of additional allocation during the financial year. Supplementary budget, regular and technical, shall not be provided; (viii) austerity measures, as issued by Finance Division from time to time, shall be fully adhered to. No allocations shall be made for banned heads of expenditures. Such allocation, if made, shall be approved by the austerity committee; and (ix) ensure full allocation of rupee cover again leased after approval of for will be adjusted from within the funds provided, anticipated foreign grants subsequently requested. Recently, Finance Division had conveyed to Power Division that the allocation of power sector subsidies for the fiscal year 2025-26 will depend on the availability of fiscal space. In a letter titled 'MEFP for EFF 2024-27 – Circular Debt (CD) Target for FY 2025-26,' the Power Division had sought indicative allocations for the upcoming fiscal year to bridge the circular debt gap. According to the Corporate Finance (CF) Wing of the Finance Division, budgetary allocations for the power sector in FY 2025-26 will be finalized through the standard budgetary process in consultation with the Budget and CF Wings of the Finance Division, keeping in view the prevailing fiscal constraints. Finance Ministry did not endorse the Power Division's proposal to release an advance subsidy of Rs224 billion to address power sector cash flow and liquidity concerns, arguing that adequate funds have already been provided. On March 25, 2025, the Power Division shared a draft summary with the Finance Ministry for submission to the Economic Coordination Committee (ECC), requesting the release of the advance subsidy. However, the Finance Division responded that sufficient funds—amounting to Rs633 billion—had already been allocated under various budgetary heads in line with the Power Division's requirements. Copyright Business Recorder, 2025
Business Recorder
26-05-2025
- Business
- Business Recorder
FY26 budget may envisage Rs1.079trn power subsidy
ISLAMABAD: The government is likely to earmark an amount of Rs 1.079 trillion subsidy for the power sector for the fiscal year 2025-26 against Rs 1.190 trillion for FY 2024-25, well informed sources in Finance Division told Business Recorder. These figures have been finalized in recent meetings between the Government's economic team and International Monetary Fund (IMF) Mission. Finance Division has also conveyed revised provisional Indicative Budget Ceilings (IDCs) of Rs 636.136 billion for sector subsidy on account of recurrent budget for 2025-26. Earlier, this amount was Rs 400 billion. Extra subsidy needs: MoF asks ministry to allocate Rs50bn for PD to secure TSG Since details of revised amount of subsidy for power sector for FY 2024-25 are not available it is not known if entire allocation has been consumed by the Power Division or there was some deviation. Finance Division has also asked Power Division to comply with mandatory instructions strictly and fully by all Principal Accounting Officers (PAOs), heads of departments and bodies /entities while preparing budget estimates for each cost centre and head of accounts. The following instructions have to be followed :(i) PAOs are required to comply with the provisions of the PFM Act, 2019 regarding performance-based budgeting and expenditures by formulating well defined plans; (ii) guidelines and procedures contained in Financial Management and Powers of PAOs Regulations, 2021 and the BCC for FY 2025-26 shall be adhered to ;(iii) ensure adoption of Single Account (TSA) as per Section 30 of the PFM Act, 2019 read with Cash Management & TSA Rules, 2024; (iv) for Climate Sensitive Budgeting / Green Budgeting the information has to be filled for both current and development budget as per the typology defined in Form-IV. The cost centres related to green component shall also be identified while submitting the BOs/NISs; (v) KPIs related to gender and climate may also be identified separately in Performance-Based Budge-ting (Form-1); (vi) PAOs, Heads of Departments and Bodies / Entities shall submit quarter-wise budget estimates for FY 2025-26; (vii) PAOs shall make expenditures keeping in view the budgetary allocations without any assumption of additional allocation during the financial year. Supplementary budget, regular and technical, shall not be provided; (viii) austerity measures, as issued by Finance Division from time to time, shall be fully adhered to. No allocations shall be made for banned heads of expenditures. Such allocation, if made, shall be approved by the austerity committee; and (ix) ensure full allocation of rupee cover again leased after approval of for will be adjusted from within the funds provided, anticipated foreign grants subsequently requested. Recently, Finance Division had conveyed to Power Division that the allocation of power sector subsidies for the fiscal year 2025-26 will depend on the availability of fiscal space. In a letter titled 'MEFP for EFF 2024-27 – Circular Debt (CD) Target for FY 2025-26,' the Power Division had sought indicative allocations for the upcoming fiscal year to bridge the circular debt gap. According to the Corporate Finance (CF) Wing of the Finance Division, budgetary allocations for the power sector in FY 2025-26 will be finalized through the standard budgetary process in consultation with the Budget and CF Wings of the Finance Division, keeping in view the prevailing fiscal constraints. Finance Ministry did not endorse the Power Division's proposal to release an advance subsidy of Rs224 billion to address power sector cash flow and liquidity concerns, arguing that adequate funds have already been provided. On March 25, 2025, the Power Division shared a draft summary with the Finance Ministry for submission to the Economic Coordination Committee (ECC), requesting the release of the advance subsidy. However, the Finance Division responded that sufficient funds—amounting to Rs633 billion—had already been allocated under various budgetary heads in line with the Power Division's requirements. Copyright Business Recorder, 2025
Business Recorder
15-05-2025
- Business
- Business Recorder
Meeting scheduled for 15-16th: PD to brief IMF on CDMP, subsidy and carbon levy law
ISLAMABAD: The Power Division is all set to brief the International Monetary Fund (IMF) virtually on circular debt development, annual rebasing outlook, power sector subsidy size and composition and carbon levy legislation on May 15-16, 2025. Prime Minister Shehbaz Sharif's government has made a series of new commitments to the IMF focused on reforming Pakistan's energy sector — including both power and gas. These commitments include regular tariff increases, transferring circular debt to the Central Power Purchasing Agency (CPPA-G), and a complete halt on introducing new subsidies for electricity or gas. The government assured the IMF that subsidy on electricity and gas will be harmonized with Benazir Income Support Programme (BISP) so that the facility is extended only to the deserving consumers. IMF targets: ECC orders Rs50bn reallocation from PSDP to PD The government will closely work with the IMF and World Bank to identify and verify consumers to be targeted under the new subsidy framework by end-January 2026; define eligibility criteria by end-July 2026; have a rebate mechanism in place with financial institutions by end-July 2026; and begin to roll out communications campaign around this by end-June 2025. According to the Circular Debt Management Plan (CDMP) shared with the IMF, Islamabad has promised timely electricity tariff increases consistent with cost recovery. NEPRA will continue with timely automatic notifications of regular quarterly tariff adjustments (QTAs) and monthly fuel cost adjustments (FCAS) to capture any gaps between the base tariff and actual revenue requirements that arise during the year, to prevent CD flow. And pledged to ensure the full implementation of the July 2025 annual rebasing (new SB, July 1, 2025), QTRs, and FCAs going forward. All provinces agree not to introduce any subsidy for electricity or gas. On the issue of reduction in circular debt, it has been promised to reduce the financial burden on the power sector by converting the existing CD stock to CPPA debt. The Power sector's existing CD stock is of Rs2.4 trillion (2.1 percent of GDP) which will be clear by end-FY25, Rs348 billion via renegotiation of arrears with IPPs (PRs127 billion of which will be via already-budgeted subsidy for CD stock clearance and PRs221 billion of which will be via CPPA cash flow); Rs387 billion via waived interest fees; and Rs254 billion via additional already-budgeted subsidy for CD stock clearance. Rs224 billion in non-interest-bearing liabilities will not be cleared. The remaining Rs1.252 trillion will be borrowed from banks to repay all PHL loans (Rs683 billion) and to clear the remaining stock of interest-bearing arrears to power producers (Rs569 billion). The loan will be taken on at a rate favourable to that currently paid on the CD stock (a major driver of CD flow and accumulation) and annual payments will be financed through Debt Service Surcharge (DSS) revenues over six years. The DSS will be set at 10 percent of the NEPRA-determined revenue requirement, adjusted each year at the time of annual rebasing, per current practice. In the event that DSS revenues fall short of the annual payment requirement, the DSS will be increased to make up for the shortfall and calibrated as per any anticipated future shortfalls in the succeeding year. To facilitate this, the government will adopt legislation to remove the 10 percent DSS cap by end-June 2025 (new end-June 2025 Structural Benchmark). There will be no fiscalisation of any revenue shortfall. The government has prepared a plan to retire, in a timely way, the interest-bearing CD stock anticipated at the end of FY25 (expected to be no greater than Rs337 billion, a result of gross flows this year), alongside the FY26 budget process, which will not utilise subsidy resources. With one of the primary drivers of CD flow-interest charges on delayed payments to IPPs significantly reduced, CD targets have been set lower. These targets will continue to decline to zero by FY31, the end of the operation. The Power Division will also share update on EV charging stations by end February 2027, adding that to incentivise private sector investment in EV charging stations, the government will adopt a Viability Gap Funding (VGF) framework that: (i) provides one-off subsidies; (ii) ensures sufficient competition through an open bidding process and includes clear criteria to evaluate the eligibility of projects for gap funding; and (iii) implements the first bid window. Finance Ministry has informed the Power Division that the allocation of power sector subsidies for the fiscal year 2025-26 will depend on the availability of fiscal space, well-informed sources in the Finance Division told Business Recorder. In a letter titled 'MEFP for EFF 2024-27 – Circular Debt (CD) Target for FY 2025-26,' the Power Division had sought indicative allocations for the upcoming fiscal year to bridge the circular debt gap. According to the Corporate Finance Wing of the Finance Division, budgetary allocations for the power sector in FY 2025-26 will be finalized through the standard budgetary process in consultation with the Budget and CF Wings of the Finance Division, keeping in view the prevailing fiscal constraints. Copyright Business Recorder, 2025
