Islamabad: International Monetary Fund’s mission chief Jeffery Franks hopes that Pakistan will overcome torturous loadshedding within a few years by improving efficiency, curtailing line losses and increased generation besides starting work on a number of projects including Dasu and Basha hydropower projects.

“In a major policy shift, Pakistan and the IMF have agreed that the National Electric Power Regulatory Authority (Nepra) will determine and notify the electricity tariff simultaneously which will become effective with immediate effect,” the IMF’s Mission Chief, Jeffery Franks, said in an interview with a local paper here.

On load shedding, he said that the government was making arrangements to finance Dasu and Basha hydropower projects. “The solution will not come in the next one or two days but there will be no load shedding after a few years,” he said.

Under the new arrangement, the government will inform Nepra about the exact subsidy amount and then Nepra will notify the tariff accordingly. Now, in line with the IMF agreement, the government will authorise Nepra to determine as well as notifying the power tariff. The Finance Ministry’s Economic Reform Unit (ERU) did work on the cash-bleeding power sector to overcome lingering difficulties.

However, the IMF chief said that Pakistani authorities had accomplished audit of Nepra for diagnosis of its problems under structural benchmarks, enabling authorities to take corrective measures to strengthen the regulator of power sector — Nepra — without wasting any time.

“The government will have to amend its rules to delegate the power of notifying electricity tariff to Nepra,” he added.

When asked about the government’s achievements in the two main pillars of energy and tax revenues on which the IMF approved a $6.67 billion (Dh24.50 billion) package, Jeffery Franks said that the IMF did not agree with the pessimistic viewpoint that the incumbent government had done nothing on these two fronts.

Giving his arguments, he said that the government took courageous steps by raising the electricity tariff for generating revenues up to 0.75 per cent of GDP in the last one year. The cost of subsidies has been reduced but there is need to do more, he added.

On improving supply, he said that the efficiency of Gencos had gone up, line losses curtailed and overall output enhanced but there was need to do more on all these fronts.

There was also improvement as a number of projects for increasing power generation was already under way and he cited the examples of Dasu and Basha hydropower projects. The government has been working on LNG facility and making investments on increasing gas production but all this will not happen overnight and will take a couple of years to achieve the desired results, he added.

On the revenue mobilisation front, he said that it was true that over the next few years Pakistan needs to improve its tax collection much more than it did in the last few years.

Despite its inability to generate revenues up to the desired mark, he said that the FBR’s tax to GDP ratio would go up by 0.7 per cent, rising from 8.5 per cent to 9.2 per cent of GDP till June 30.

“Similarly, the country’s tax to GDP ratio would be increased by 1 per cent in the next budget 2014-15 as Gas Infrastructure Development Surcharge (GIDC) would increase revenues by 0.4 per cent of GDP and 0.75 per cent through abolishing SROs, removing tax exemption and broadening of tax base,” he added.

He said that the FBR needed to pursue reforms by improving its tax administration, making enforcement effective and removing bottlenecks to improve tax to GDP ratio.

He said that the third main pillar of the IMF programme was ensuring recovery of Net International Reserves (NIR) held by the State Bank of Pakistan.

“The foreign currency reserves of the SBP will go up from $3 billion to $9.5 billion till end June 2014,” he added.

“The Balance of Payment (BoP) crisis, which was looming large at early stages, has now started receding and it will continue to improve in the wake of continued purchase of dollars by the SBP, pursuing privatisation plan and many other initiatives,” he added.

On granting autonomy to SBP through tabling a bill in the Parliament, Jeffery Franks said that it was a “controversial” issue in Pakistan as some people have an obsession that there is no need for complete independence of the central bank

“I respect their viewpoint but disagree with them as economy can make much progress where there is independence of the central bank,” he maintained.

He said there could be laws existing related to autonomy of central banks but practically there was no autonomy but there were countries where no law existed but the central banks enjoyed a lot of independence.

“The IMF experts had some reservation on the bill tabled by the government related to SBP amendments as the Fund wants to minimise involvement of Finance Ministry into the affairs of the central bank,”

he said that if the bill was approved in its existing shape further improvement could be made.