ISLAMABAD: In a bid to pacify the International Monetary Fund (IMF) for economic relief, the government on Thursday hiked the prices of all petroleum products by Rs 30 per liter with immediate effect to reduce fuel subsidy.
Speaking at a hastily called press conference, Finance Minister Mifta Ismail, who was moving between the Finance Ministry and the Prime Minister’s Office shortly after returning from Doha, said the government had no means to prevent the country from moving towards one. There was no other option. Bad situation
This is the highest ever increase in the prices of all petroleum products in one go.
An official said that this is the first step towards persuading the IMF to release the next tranche at the earliest.
Prices of all petroleum products increased by Rs 30 per liter to reduce fuel subsidy
With a jump of Rs 30, ex-depot prices of petrol increased by Rs 179.86 per liter, high-speed diesel (HSD) to Rs 174.15, kerosene by Rs 155.56 and light diesel oil (LDO) by Rs 179.86, the finance minister said with a jump of Rs 30. Will be 148.31 Rs.
Still, the government will pay Rs 56.71 per liter on HSD, Rs 37.84 on LDO, Rs 21.83 on petrol and Rs 17.02 on kerosene.
Indicating some other upcoming adjustments, including electricity tariffs, an official said it was the single biggest ticket item that disrupted an employee-level agreement between Pakistan and the IMF in Doha. The rest are small things and will come into place, he said.
A top official said that the IMF had demanded not only complete withdrawal of subsidies on petroleum products but also the resumption of petroleum levy and general sales tax. However, the government clarified that such a sudden setback was both politically and economically unbearable, and therefore promised to gradually reduce the financial burden on the budget.
Miftah Ismail said the decision to hike such prices was not an easy one for any finance minister or prime minister but had become inevitable due to the inappropriate decision of the previous government to freeze prices for months. He claimed that now the exchange rate will improve, the market will stabilize, the economy will balance and investors will take positive decisions.
He said the government is currently funding fuel prices by up to Rs 120 billion out of the budget and the poor and common man are subsidizing the rich and industrialists to drive luxury vehicles. As a result, the consumption of petroleum products has increased by more than 20 percent.
The minister acknowledged that the IMF had refused a bailout without withdrawing fuel and power subsidies, but said discussions with the fund were very positive and the latest decision would yield positive results. “I can assure you that hopefully we will achieve a staff-level agreement with the IMF”, he said without giving a date.
Mr Ismail said there was not much difference between the estimates of Pakistan and the IMF for next year’s budget. He said the prime minister would soon unveil a package to protect the poor from the hike in petroleum prices which was inevitable due to the agreements signed by the previous government. Under those agreements, the prices of various products should have gone up to Rs 268-305 per litre.
The minister acknowledged that a rise in the prices of POL (petroleum products) would lead to inflation, but the other way around was to allow the exchange rate to deteriorate and that would lead to inflation, among other consequences. He said the government had taken a conscious decision to increase the prices and would stand by it as the election was between the political interest of the party and the state.
“It would cost us political capital but the interest of the state was supreme and the government was ready to sacrifice the political costs; We cannot allow the country to default.”
Miftah Ismail said that the IMF and the Pakistani team discussed the significant slippage in the current financial year due to fuel subsidies given in February 2022. The two sides also discussed the targets for the fiscal year 2023 in the light of high inflation, depleting foreign exchange reserves. and agreed on a larger current account deficit and the need for a tighter monetary policy and tightening of the fiscal position.
“The government is committed to reducing the budget deficit in the fiscal year 2023”, he said, adding that the government is also committed to revive the IMF program and put Pakistan back on a sustainable development path.
The Finance Ministry said in a statement that the IMF expressed concern over the fiscal and current account position arising out of government actions, particularly power and fuel subsidies, and other slippages, and that both sides expressed the necessary divergence in the current account and fiscal deficits. and identified areas of improvement. ,
Published in Dawn, May 27, 2022