President Camacho
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Govt plans massive printing of currency
ISLAMABAD: After its existing loan package with the IMF ends on September 30, Pakistan has decided to start planning to print currency at the maximum to plug the big hole in the power sector which sucks about Rs280 billion every year, a senior official told Our Sources.
Under its master plan to clinch the next general elections, the government will not increase the power tariff by Rs15.6 percent in 2011-12 as worked out by the ministerial committee on energy, the official said. The government will not implement power sector reforms or introduce efficiency in collecting electricity bills and running electric power generation and distribution companies to turn the bleeding power sector into a profit-making sector.
According to the official, the government will lose its authority and powers to meddle in the affairs of Gencos and Discos if power sector reforms are implemented, Pepco is dissolved by October 31, new chief executives are appointed from the open market in all electric power distribution companies and board of directors of Gencos are constituted and notified as done in the case of Discos. Since the government has made a plan to recruit its own party workers and well wishers to pave the way for victory in the coming elections, the implementation of power sector reforms is in jeopardy, the official said.
According to one estimate, running defaulters owe Rs89 billion as of today, but since they are influential business tycoons and feudal lords, Pepco will continue to extend them electricity supply despite the fact that they are not paying their bills. The government, no more under IMF compulsions after quitting its programme, will not be in a position to offend influential defaulters keeping in view the future elections, the official said.
The government will go for a massive surge in printing currency notes to generate liquidity to overcome the chronic issues of circular debt of Rs247 billion and bridge the gap of 20 percent (Rs1.60 per unit) between the determined and notified tariff. This decision, the official argued, might help win the hearts of the masses, but printing currency notes will ultimately cause a massive surge in inflation, already hovering at 14 percent.
This means the masses for whom tariff rationalisation is not materialised will be the losers in the end as printing currency is inflationary, the official added. The government may harness short terms gains out of its master plan, but the country will be the loser as the economy will collapse as a result of a massive printing of currency.
The government would, the official feared, also flout the understanding given to the IMF by not surrendering its rights to Nepra about notifying the electricity tariff. It seems, in case the power regulator gets the power to notify the electricity tariff as earlier agreed with IMF, the government will stand nowhere among the masses because it would be left with no option but to increase the tariff to be notified by the power regulator, the official added.
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If this piece tells the truth, then we know why the IMF SBA was rejected for 2011-2012.
ISLAMABAD: After its existing loan package with the IMF ends on September 30, Pakistan has decided to start planning to print currency at the maximum to plug the big hole in the power sector which sucks about Rs280 billion every year, a senior official told Our Sources.
Under its master plan to clinch the next general elections, the government will not increase the power tariff by Rs15.6 percent in 2011-12 as worked out by the ministerial committee on energy, the official said. The government will not implement power sector reforms or introduce efficiency in collecting electricity bills and running electric power generation and distribution companies to turn the bleeding power sector into a profit-making sector.
According to the official, the government will lose its authority and powers to meddle in the affairs of Gencos and Discos if power sector reforms are implemented, Pepco is dissolved by October 31, new chief executives are appointed from the open market in all electric power distribution companies and board of directors of Gencos are constituted and notified as done in the case of Discos. Since the government has made a plan to recruit its own party workers and well wishers to pave the way for victory in the coming elections, the implementation of power sector reforms is in jeopardy, the official said.
According to one estimate, running defaulters owe Rs89 billion as of today, but since they are influential business tycoons and feudal lords, Pepco will continue to extend them electricity supply despite the fact that they are not paying their bills. The government, no more under IMF compulsions after quitting its programme, will not be in a position to offend influential defaulters keeping in view the future elections, the official said.
The government will go for a massive surge in printing currency notes to generate liquidity to overcome the chronic issues of circular debt of Rs247 billion and bridge the gap of 20 percent (Rs1.60 per unit) between the determined and notified tariff. This decision, the official argued, might help win the hearts of the masses, but printing currency notes will ultimately cause a massive surge in inflation, already hovering at 14 percent.
This means the masses for whom tariff rationalisation is not materialised will be the losers in the end as printing currency is inflationary, the official added. The government may harness short terms gains out of its master plan, but the country will be the loser as the economy will collapse as a result of a massive printing of currency.
The government would, the official feared, also flout the understanding given to the IMF by not surrendering its rights to Nepra about notifying the electricity tariff. It seems, in case the power regulator gets the power to notify the electricity tariff as earlier agreed with IMF, the government will stand nowhere among the masses because it would be left with no option but to increase the tariff to be notified by the power regulator, the official added.
-------------------
If this piece tells the truth, then we know why the IMF SBA was rejected for 2011-2012.
