ISLAMABAD, June 24: The government has agreed not to reduce power tariff after sharp criticism from the International Monetary Fund (IMF) over Pakistan’s economic performance with particular reference to the power sector.

This has been revealed in IMF’s staff report, released at the conclusion of the fifth review of the $1.47 billion Poverty Reduction and Growth Facility, released in Washington on Monday night.

A reduction in tariff was expected by end-June as a result of reduction in international price of furnace oil during the previous quarter.

Pakistan has agreed that the power prices would not be adjusted under its quarterly fuel adjustment formula until recovery of the losses incurred by the two utilities.

The IMF has also set a new performance criterion for 2003-04 and has asked for seeking parliament’s approval to remove 20 income tax exemptions.

The report foresees three major risks to the economy during 2003-04, including, regional security threat, higher than expected deficits of power utilities and continued parliamentary logjam over constitutional amendments.

To protect the budget against suck risks, IMF urged for adjusting other non-priority expenditure and/or take appropriate revenue action while protecting key social spending.

It has asked the government to take comprehensive measures to reduce burden on fiscal allocations.

The report said that the issues of the power sector need to be tackled forcefully under war footing measures since this sector has proven to be the main drain on the budgetary resources and has obtained a firm commitment from the Pakistani authorities to install electricity meters in Federally Administered Tribal Areas (FATA) during the next year.

While the FIP includes specific measures like gradual metering of FATA users, subcontracting collection to private operators, and others, it stressed for additional steps to achieve at least Rs2 billion of payments on FATA bills.

It also enlist the payments adjusted by the federal government against Wapda and KESC including Rs63.6 billion for 2002-03 and Rs33.2 billion for the next fiscal i.e. 2003-04. During 2003-04 Wapda would get Rs21.5 billion and KESC Rs11.7 billion.

The revised FIP also indicates delays in two key steps in the unbundling of WAPDA, planned for end-April and end-June 2003. Both are structural benchmarks under the on-going three-year billion soft-term PRGF programme.

Completing the unbundling and corporatization process will be an important prerequisite for involving the private sector, and the mission urged the authorities to more forcefully tackle the administrative difficulties that are delaying the assignment of WAPDA’s assets and liabilities to successor companies.