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Pakistan cuts power prices as a sign of stabilising economy

Shehbaz sharif, the Prime Minister, announced on Thursday that Pakistan would cut electricity prices for industrial and domestic users. This is a sign that the economy has recovered from its near-default.

The International Monetary Fund intervened to stabilize the Asian country's financial situation with a standby agreement in 2023, and then a bailout of $7 billion last year.

Sharif said that it was difficult to convince the IMF to accept a reduction in electricity tariffs, despite the fiscal consolidation mandated by the bailout.

He said at an event in Islamabad that he couldn't describe the efforts that were involved. The government reforms to the power sector, he added, made the reductions possible.

He also said that Pakistan will use the money it saves from the lower oil prices in the world to invest in the power sector.

After several price increases over the last couple of years, Pakistanis will feel relieved by lower power prices.

Sharif announced that the tariff would be reduced by 7.41 rupees (US$0.0264) on average per kilowatt hour for domestic users and by 7.59 rupees (US$0.0264) on average per kilowatt hour for industrial users to an average of 40.60 rupees.

Pakistan's $350-billion economy has struggled since May 2023 when the inflation rate reached a record high of 38.50%. Growth is now negative, while reserves are down to a few weeks worth of controlled imports and interest rates have risen to 22.2%.

Sharif stated that "we have succeeded in bringing the inflation to single-digits", adding that the almost 10-percentage point reduction in the main interest rate of the country in the past year will help businesses grow.

(source: Reuters)