Pakistan's privately-owned Hub Power Company - known as Hubco - has resumed discussions with the authorities to resolve a bitter dispute over electricity tariffs which could affect Pakistan's standing with the IMF.

The dispute between the government and privately-owned power companies (IPPs) - of which Hubco is the biggest - began more than two years ago when Prime Minister Nawaz Sharif's government accused the power companies of selling expensive electricity to consumers.

An investigation set up by the government into allegations of bribery became embroiled in arguments over the harassment of IPP officials.

World Bank steps in

The investigation subsequently came to be widely seen as a witch-hunt rather than a credible probe, and ended only when the World Bank urged Mr Sharif's government to stop it.

The World Bank - a Hubco backer - as well as other donors feared the issue could adversely affect foreign investment.

Tthe government now appears to be in a bind.

Senior government officials and western diplomats in Islamabad say that Pakistan may face difficulty in getting up to $280m from the IMF which it hopes to receive next month.

They say that without an agreement between Pakistan and the IPPs, there are chances that IMF lending may at least be delayed - if not completely withheld.

IMF support vital

The IMF's next installment is part of a U$1.56 billion loan which was agreed last year.

Pakistan has used the IMF's support to reschedule its foreign debt from its western lenders.

The Finance Minister, Ishaq Dar, is now in charge of the negotiations to find a solution to the power dispute - heading the 11th official committee set up in just over two years to solve the problem.

The minister's main challenge is to reconcile the differences between his government's determined effort to seek cuts in tariffs by the power producers, and the desire of the power companies to get the best possible deal.