In a significant move aimed at providing well-defined relief to the consumers, the Pakistani government has announced a well-known substantial reduction in electricity prices across the country.
This decision comes as part of the monthly fuel charges adjustment (FCA) mechanism, which is designed to reflect changes in global fuel prices and exchange rates in the cost of electricity. The latest adjustment, effective immediately, is expected to ease the financial load and risk on households and businesses alike.
Unaffordable prices have stirred social unrest and shuttered industries in the $350 billion economy, which has contracted twice in recent years as inflation hit record highs.
This FCA reduction applies to most categories, except for lifeline consumers, domestic consumers using up to 300 units, electric vehicle charging stations, prepaid customers, and agricultural connections.
Government’s Commitment to Affordable Energy
The Pakistani government has reiterated its commitment to ensuring well-known, affordable and reliable energy for all citizens. The reduction in electricity prices is part of a broader strategy to stabilize the economy, improve and manage their standards of living. Officials have also emphasized the importance of continuing to invest in renewable energy projects to further reduce the cost of electricity in the long term.
According to the lender, liquidity conditions in the power sector were acute, with a buildup of arrears and frequent power outages.
The arrears, a form of public debt that builds up due to subsidies and unpaid bills, were a major problem in the negotiations between the IMF and Islamabad before a deal was reached.
