Pakistan Announces Electricity Tariff Reduction, Export Refinance Rate Cut to Boost Economy
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Pakistan’s government announced a series of economic measures Friday aimed at bolstering the industrial sector and increasing exports, signaling a cautious optimism about the nation’s economic stability. The initiatives, unveiled by Prime Minister Shehbaz Sharif during an address to leading exporters and business figures in Islamabad, include a reduction in electricity tariffs and a lowered export refinance rate.
Addressing Industrial Concerns & Export Growth
A key component of the economic plan is a reduction of Rs4.4 per unit in the electricity rate for industries. “A Rs4.4 reduction is being made in the electricity unit rate for industries,” the Prime Minister stated, adding a note of frustration that, “if it were in his control, he would reduce it by another Rs10.” He acknowledged existing constraints, stating, “However, my hands are tied, as you all know well.” Further relief for the industrial sector includes a reduction in wheeling charges to below Rs9, intended to facilitate power trading between neighboring industries.
To further incentivize exports, the government, in cooperation with Pakistani banks, will reduce the export refinance rate from 7.5% to 4.5%. This move is designed to provide businesses with more affordable access to capital for export-oriented activities.
From Brink of Default to Stabilized Economy
The announcements come after a period of significant economic hardship for Pakistan. The Prime Minister recalled the precarious situation in 2023, when the country faced the very real threat of default. “Day and night, there were reports that Pakistan was going to default,” he said, describing it as a “big challenge for the nation.”
He detailed a critical meeting with International Monetary Fund (IMF) Managing Director Kristalina Georgieva in Paris, where Pakistan’s past inconsistencies with IMF programs were raised. According to the Prime Minister, Ms. Georgieva expressed concerns about the limited timeframe for reaching a new agreement. He responded by offering a “word of honour” to ensure full implementation of any future agreement. “When I came back to Pakistan, she called me to tell me [..] that our team will sit down with you and you must honour the commitment you made. This is how Pakistan was saved from default.”
The Prime Minister reported that Pakistan’s foreign exchange reserves have doubled in the third quarter, though he acknowledged this includes loans from friendly nations. He expressed gratitude to China, Saudi Arabia, the United Arab Emirates, and Qatar for their assistance in securing these loans, while also recognizing the obligations that come with accepting financial aid.
Despite these positive developments, the Prime Minister asserted that Pakistan’s economy has now achieved a degree of “stability.” He pointed to single-digit inflation and a policy rate of 10.5% – a significant improvement from the 21.5-22% rate seen previously.
Challenges Remain & Focus on Sustainable Growth
However, the Prime Minister cautioned that economic stabilization is not sufficient. He acknowledged the harsh realities of increased poverty, unemployment, and limited profitability in current exports. He noted that Pakistani industries are struggling to compete internationally due to higher costs.
“I want to present a harsh reality to you,” he stated, emphasizing the need for sustainable growth. He stressed that the government’s role is not to dictate to the private sector, but to foster an environment conducive to export-led growth and to support small- and medium-sized enterprises (SMEs). “We have to grow our economy, and it has to be sustainable, and we must encourage export-led growth,” he said, stressing that there was “no other way.” He called for a collaborative effort between the public and private sectors to “hold the hand of SMEs.”
Recognizing Exporters & Revitalizing PIA
Prime Minister Shehbaz expressed his “full faith” in the vision and commitment of Pakistani business leaders, believing they hold the key to transforming the nation’s economy within a few years. As a gesture of appreciation, he announced that exporters awarded during the ceremony would receive blue passports, designating them as “ambassadors at large.”
The Prime Minister also addressed the recent privatization of Pakistan International Airlines (PIA), expressing optimism about its revival. He recalled PIA’s former prominence as a world-class airline, lamenting its decline from a “top ten” global carrier. “PIA’s legacy — ‘great people to fly with’ — was on banners in London and Brussels […] Where did that era go?” he asked. He expressed confidence in the ability of Arif Habib Corporation Limited, the winning bidder in the privatization auction (Rs135 billion in December), to restore PIA to its “past glory,” reiterating the government’s full support.
