ISLAMABAD   -   After witnessing massive devaluation in currency, the people should get ready for further economic shocks including increase in power tariff, massive taxation and expected rise in interest rates in the days to come.

Pakistan had agreed with International Monetary Fund (IMF) for taking tough economic decisions to reduce the increasing budget deficit.  The decisions included enhancing electricity prices, increasing taxes and interest rates. All these measures would increase the inflation rate, which had already started enhancing. The upcoming budget for year 2019-2020 would aim for a primary deficit of 0.6 percent of GDP supported by tax policy revenue mobilization measures to eliminate exemptions, curtail special treatments, and improve tax administration.

An official informed The Nation that government would take massive revenue generation measures in the upcoming budget to control the budget deficit. He informed that revenue generation measures as well as eliminating tax exemptions could be worth of Rs500 billion. He further said that government would also reduce the soaring expenditures. According to the initial plan, the government would reduce the expenditures by Rs80 billion to Rs100 billion in the next budget. Expenditures would be reduced through expenditure cut by eliminating subsidies and slashing down on certain ministries and departments, he added.

Meanwhile, the government has also assured the IMF to increase the power tariff to reduce the subsidies given to the electricity consumers. As per plan, the government would increase the power tariff by Rs2.60 per unit in two stages, enhancing g the tariff to Rs 15.58 per unit from existing rates of Rs 12.98 per unit. In the first phase, tariff will increase by Rs 1.30 per unit from July 1, 2019 whereas in the second phase increase of Rs 1.30 per unit will be effective from September 1, 2019. However, there would be no increase for the domestic consumers using up to 300 units per month.

Similarly, the State Bank of Pakistan (SBP) is likely to increase the interest rate in the upcoming monetary policy, which would be announced on Monday. According to analysts, the SBP is expected to push interest rate up over 100 basis points as the country is facing an imminent threat of a double digit inflation following freefall of rupee. The Monetary Policy Committee (MPC) in its last meeting had decided to increase the policy rate by 50 bps to 10.75 percent effective from 1st April 2019.

The rupee devaluation has already started last year. Dollar rate, which was stable in the interbank market standing around Rs141.50 on last Monday, had gone up to Rs149 on Friday.

The US dollar value has gone up by Rs4 to all-time high Rs151 in open market. Similarly, it has increased by Rs2.48 in the interbank market to reach Rs149. The dollar began increasing almost immediately as trading began.

Senior government’s officials as well as independent economists believed that Pakistan-IMF deal for new loan programme and increase in oil prices would fuel the inflation rate in the months to come. It is projected to go to double digits within next two to three months.  Inflation rate had touched five years highest level of 9.41 percent in March this year.