Islamabad: Pakistan's amended Circular Debt Management Plan (CDMP) was rejected by the International Monetary Fund (IMF) review team. It has requested that the Pakistani government raise the price of energy by about Pakistani Rupees (PKR) 11 to 12 per unit in order to cap the additional subsidy at Rs 335 billion for the current fiscal year, according to The News International.
Both parties will continue to hold discussions to conclude the ongoing ninth review under the $7 billion Extended Fund Facility as the IMF review mission arrived in Islamabad. According to the research, circular debt happens when a single firm experiences issues with its cash inflows and fails to make payments to its creditors and suppliers.
The IMF has called the revised CDMP “unrealistic” which is made on the basis of certain wrong assumptions. The Pakistan government will have to make changes in its policy prescription to restrict the losses of the power sector, as per media report.
Additional taxing measures would be finalised after the IMF and Pakistan's minister of defence have resolved any fiscal issues. In contrast to an earlier prediction of Rs 1,526 billion, the updated CDMP has called for a rise in the circular debt of Rs 952 billion for the current fiscal year.
The Pakistan government’s revised CDMP demonstrated that the government needed an additional subsidy of Rs 675 billion despite increasing the power tariff in the range of Rs 7 per unit through quarterly tariff adjustment in the first two quarters of 2023 and Rs 1. 6 for the third quarter.