Finance Minister Miftah Ismail announced Thursday a massive hike in the price of petroleum products after the International Monetary Fund (IMF) emphasised abolishing the subsidies on the commodities.
In a press conference, the finance minister said the government has decided to hike the price of petrol, diesel, kerosene oil, and light diesel by Rs30, effectively from May 27.
The finance minister noted some burden was shifted on the masses, but despite the massive increase in the price of petroleum products, the government was still bearing losses, but vowed to soon strike a staff-level agreement with the Fund. He explained that the decision was taken in order to ensure the revival of the International Monetary Fund (IMF) programme. Ismail said the government had no other option but to raise the prices, adding that “we are still bearing a loss of Rs56 per litre on diesel” even under the new pricing.
He was of the view that the government was aware of the political repercussions of the decision, saying “we will face criticism but the state and its interests are important to us and it is necessary for us to save it.”
He said the country could have gone in the “wrong direction” if the steps were not taken. He said the decision was a tough one for Prime Minister Shehbaz Sharif, saying “we cannot let the state sink for the sake of politics.” The finance minister blamed ex-premier Imran Khan for freezing the petrol prices after “realising that the days of his government were numbered”. He claimed the price revision was not solely due to the IMF’s pressure, saying “the Fund indeed refused to grant further loan until we raise prices … but we [also] had to take this decision after all.”
Ismail insisted that the prices of essential items will go down whenever the rupee appreciates against the US dollar. The minister claimed to have held “very good, positive talks with the IMF” as he assured that “more positive talks will follow after the decision we have taken today.” He expressed hope that a staff-level agreement will be reached with the IMF in days to come.
The price hike comes a day after the government and the IMF failed to reach an agreement on an economic bailout mainly because of the former’s indecision on fuel and electricity subsidies and resultant next year’s budget uncertainties.
Pakistan and the IMF could not reach a staff-level agreement a day earlier after the Fund said there were deviations from the policies that were agreed between both sides. The PTI-led government had originally agreed to the IMF’s demand of raising the price of electricity and petroleum products but, later in March, Imran Khan announced subsidies on both commodities – and the current government was continuing with the same arrangement.
Earlier, the International Monetary Fund (IMF) emphasised the urgency of concrete policy actions on part of the government to remove fuel and energy subsidies and for the upcoming budget for the fiscal year 2022-23 for the revival of the stalled loan programme. In a statement, the Fund said that an IMF mission led by Nathan Porter held both in-person and virtual discussions in Doha, Qatar, with the Pakistani authorities during May 18-25 on policies to secure macroeconomic stability and support sustainable growth in Pakistan. At the conclusion of the mission, Porter stated that the mission has held highly constructive discussions with the Pakistani authorities aimed at reaching an agreement on policies and reforms that would lead to the conclusion of the pending seventh review of the authorities’ reform programme, which is supported by an IMF Extended Fund Facility arrangement. Considerable progress was made during the mission, including on the need to continue to address high inflation and the elevated fiscal and current account deficits, while ensuring adequate protection for the most vulnerable, he added.
