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Monday, July 17, 2017

IMF For Ending Inequitable Subsidy On Electricity Tariff

The International Monetary Fund (IMF) urged Pakistan to eliminate poverty by eliminating unfair subsidies to electricity rates and replacing them with direct cash transfers.

The IMF also stressed the immediate task of the Benazir Flagship Support Program (BISP) in spite of its important role in significantly reducing poverty incidence in a recent report on Pakistan, in consultation with Article IV.

Although subsidies remain an important part of Pakistan's social welfare, subsidies have been significantly reduced from about 3% of GDP in FY12 to 0.8% in FY2015-16, while electricity subsidies are 0.6% of GDP in 2015-16

Subsidies fell 1.5% of GDP due to increased electricity rates, introduction of surcharges, and the reduction of unfamiliar subsidies for commercial, industrial and mass housing consumers during the period in which oil prices fell.

The IMF said it needs continuous reforms to further reduce electricity grants to achieve better goals for the poor and to secure resources for spending on growth priorities. Because many people in the poor are unable to use electricity, they need to "completely eliminate the subsidy and strengthen the targeted cash transfer" to protect the poor.

The power consumption standard for concessional tariffs is still high, and most households claim subsidies because they consume less than 300 units a month.

The International Monetary Fund (IMF) added that lowering the consumption limit for concessional electricity rates would contribute less to the depletion of the remaining electricity subsidies and lower their levels, the IMF added: "The consumption The reduction of the standard or the transfer to the target subsidized poverty must be explored. "

It said that the goal of the subsidy was strengthened while maintaining subsidies for the already selected consumer category. In particular, lifeline tariffs are levied on vulnerable consumers using up to 50 units a month.

The IMF added that the social safety net has been strengthened over the past four to five years and cash transfers to the poor under the BISP have increased about 0.3 percent of GDP, but it is necessary to strengthen spending on social safety nets. Most vulnerable.

The poverty and inequality social security network plays an important role in supporting the poor and protecting the vulnerable. However, despite the strength over time, the size of the social safety net remained low compared to the average of local and emerging markets.

The IMF talked about BISP issues such as outdated recipients' databases, potential lack of awareness, and beneficiaries without ID to receive cash remittances.

You need to strengthen the program by updating the beneficiary database, extending coverage, and strengthening training cash transfers. Expanding BISP coverage is an important factor in strengthening the program's impact and impacting poverty.

If the IMF reaches an additional 1 million poor, the poverty rate may increase by about 1.5 million people and the poverty rate by about 0.7 percent. "But further progress is constrained by a number of factors, including outdated beneficiary databases, lack of potential awareness, and beneficiaries who do not have the necessary ID to receive cash transfers."

The BISP's continued commitment to continually strengthening the setting and renewal of beneficiary databases based on planned new national surveys is important and must be continued.

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