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In a decisive move, Prime Minister Shehbaz Sharif has voiced his concerns over the annual loss of Rs500 billion due to electricity theft. Emphasizing the urgent need to cut power prices, he highlighted the dual goals of providing relief to domestic consumers and industries while addressing systemic issues in the power sector. The Prime Minister has also underscored ongoing efforts to reform the electricity sector and reduce tariffs, aiming for significant economic stability.
Electricity Theft and Power Sector Reforms
During a meeting with newly appointed chairmen and board members of power distribution companies (Discos), PM Sharif attributed a significant portion of electricity theft to collusion with Discos’ employees. He stressed that reducing theft should be a top priority and warned that failure to meet this target would not be tolerated. To combat this, the Prime Minister announced plans to implement smart metering and engage in discussions with China to utilize locally sourced coal in power plants, which could potentially save the country $1 billion annually.
Economic Reform Agenda
PM Sharif is set to unveil a comprehensive economic reform plan, aiming to reduce average tariffs on imports from over 19% to approximately 14% over the next three years. This plan, based on recommendations from two high-powered task forces, seeks to drive export-led growth and streamline tariff structures. The reduction in tariffs is expected to boost import volumes by 5%, increase government revenue, and potentially raise exports by $750 million in the first year of implementation. The task forces have also proposed strategies to enhance export growth and economic stability, including reducing bureaucratic hurdles and integrating into global value chains.
Tariff Rationalization and Projected Impact
The tariff rationalization committee has recommended lowering customs, additional customs, and regulatory duties based on regional averages. This initiative is anticipated to lead to a significant increase in exports, potentially raising the total from $32 billion to $35 billion over three years. However, Prof. Stefan Dercon’s projections suggest even higher potential gains, including an additional $20 billion in exports annually, contributing to a more robust GDP growth.
Addressing Economic Challenges
The economic reform plan also includes recommendations for broadening the tax base, reducing red tape, and enhancing energy security. The task forces emphasized the importance of creating a level playing field for businesses and stimulating both domestic and foreign investment. Key strategies involve diversifying exports, improving the management of state-owned enterprises, and achieving a 6% or higher GDP growth by FY28.
Government Initiatives and Cabinet Decisions
In a recent cabinet meeting, PM Sharif discussed the need to lower production costs to revive the industrial and agricultural sectors. He emphasized the importance of reforms within the Federal Board of Revenue (FBR) to improve tax collection and support national development. The cabinet also approved an increase in the number of Privatisation Board members and regularised all contractual employees of the Federal Board of Education. Additionally, uninterrupted gas supply to urea factories was endorsed, reflecting the government’s commitment to addressing critical industrial needs.
