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Pakistan Inflation To Rise On Higher Electricity Tariffs -IMF Official
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ISLAMABAD -(Dow Jones)- Inflation in Pakistan is expected to rise over the next few months because of higher electricity tariffs, but a hike in key monetary policy rates will not be needed, an International Monetary Fund official said Monday.
"There would be no need to increase interest rates after electricity tariff adjustment because it (the increase in inflation) is temporary," Paul Ross, IMF Resident Representative in Pakistan, told Dow Jones Newswires. He added that inflation would ease soon.
Pakistan increased electricity tariff by up to 13% earlier this month and the country is expected to increase it further by 6% on April 1.
Ross said the inflation rate will rise over the next two months but then resume its recent downtrend.
Price pressures have been receding because of weak demand in the economy of the strife-torn nation. The inflation rate was at about 10% in December, falling sharply from about 20% at the end of June 2009--the end of the last fiscal year.
Pakistan's economy could still grow at 3.5% in the current fiscal year through June 2010, and 4% next year if structural reforms are implemented vigorously, Ross said.
The State Bank Of Pakistan, the country's central bank, expects the economy to grow 2.5%-3.5% this fiscal year.
"It is not hard to say yet that it (Pakistan) can rebound faster than other regional and global countries, which underwent a severe financial crisis," Ross said.
The country must keep its budget targets in check and strengthen public finances, he added.
ADD A COMMENT
May 08 2010 There have been alot of talk. From hydro to wind to wave. The problem with pakistan is that, none of these options are going to work. Pakistan is a small country compared to its population. hydro dams aside from being expensive in an effectively bankrupt country, drown large amounts of precious land, so Pakistan can not meet all of its energy needs by hydro generation. wind, solar and wave technologies are not proven and are expensive toys which hardly contribute a few percentage of power demands in the most rich and technologically superior countries so Pakistan should not gamble on these toys and spend its precious money on them. Coal power plants are a very attractive option, since pakistan has coal reserves to provide its energy needs for several dozen years, but they are dirty and generally any kind of power plants are not cheap. A 1,000 MW plant costs upwards of a billion euroes, and that is only the price of the plant and does not include a billion dollar more needed to develop a large enough mine to feed coal for the plant. Nuclear plants cost several times more and can cost upto 10 billion dollars for a 1,200 MWh. Pakistan does not have the technology to make nuclear power plant and currently no other country also wants to sell nuclear plants to Pakistan due to terrorism problem. Pakistan as of now is short by 6,000 MW and as the population grows and people’s expectations shoot up and half of Pakistan that is right now not connected to electric grid, become connected, You can imagine how many plants Pakistan has to make. Also it takes anywhere between 4 years for a small coal plant to 12 years for a large dam or nuclear plant to be built. Right now facilities like airconditioners and computers are used by less than 10% of pakistan and most of the economy is based on ancient agricultural techniques. If pakistan is ever to become modern and industrialized then it needs, at least 1 Kilowatt hour capacity for every person. With a current estimated population of 180 million that comes to 180 thousand Megawatt hour capacity. Pakistan has now just 20 thousand. With growing population Pakistan would need more than 360 thousand MWh of energy by 2050, when Pakistan’s population hits 360 million. So what is the solution. Pakistan does not have money and technology to develop its own plants. Independent power producers and private generating units are also not a long term option as they are thieves selling the same electricity in Pakistan for up to 55 US cents per kilowatt hour as compared to 12 cents in Canada and United States, under the pretext of investment in a risky terrorist infested country. Only one option remains, which is fortunately for Pakistan is both very cheap and reliable as well as least time consuming. The option has only one glitch, and that is, it will accompany the wrath of USA. That option is Iran. Iran can provide Pakistan with almost unlimited amount of natural gas which is much cheaper than the prevailing LNG prices in the world. Also Iran has a very developed electricity generation system and has offered Pakistan to meet the entire Pakistani shortage of electricity by offering the subsidized rate of 11 cents per kilowatt hour. Iran has even offered to build the entire transmission lines to Pakistan entirely with its own money and expertise on a record time of 14 months. If Pakistan just says ok. there will be no load shedding by the next summer. It is a very brilliant option both economically as well as security wise. Economically Pakistan will get as much power as it needs comparatively cheaply, and can spend its little money on developing industries and other needed infra structure instead of building power plants. And since Pakistan is going to be dealing with a government that is the brotherly government of Iran, Pakistan will no more need to play a slave to IPP’s. These kind of arrangements are immensely successful and promote peace and prosperity, for example almost all of the countries in continental Europe buy their power from France and Germany. But alas our leaders are too afraid of US. They have not learnt anything from Turkey which is in a similar situation to Pakistan being an American client. But Turkey despite being a client has defined its red lines with USA regarding its national security. So Turkey buys both gas and electricity from Iran, and Americans understand that Turkish people will not listen to them in these regards unless USA could satisfy their energy needs instead of Iran. But since USA can not even satisfy its own energy needs and has to import energy itself then Turks buy cheap energy from Iran. Pakistan could do the same if it had the guts to tell Americans that either they should meet the national energy needs by the next summer or that Iranians will be invited to take care of our problem. It is a choice Pakistan has to make today and not tomorrow. Iran is pakistan’s only option