Finance Minister Miftah Ismail has agreed with the global lender’s suggestion of curtailing the fuel subsidy, which was announced by former premier Imran Khan, as Pakistan can not afford such an amount of assistance amid the prevailing economic situation.
“There is never a good time to start anything difficult. We have had actually good discussions with the [International Monetary] Fund. They have talked about removing the subsidy of fuel and I agree with them,” he said during a virtual conversation hosted by the Atlantic Council’s South Asia Center and GeoEconomics Center in Washington.
Miftah was accompanied by Pakistan’s Ambassador to the US Sardar Masood Khan.
After former PM Imran Khan’s February 28 decision, the existing price of high-speed diesel is Rs144.15 per litre, petrol (Rs149.86 per litre), and kerosene oil (Rs125.56 per litre), and LDO (Rs118.31 per litre).
The new coalition government on April 15 rejected the Oil and Gas Regulatory Authority summary of increasing the petrol price by Rs21.50 and diesel by Rs51.30. Addressing an iftar for parliamentary leaders, PM Shehbaz said that people would have started “cursing people” if the government had given a green signal to such a proposal.
According to business experts, the petrol price could shoot to Rs227 per litre after the ending of government subsidy, which amounts to Rs15-20, the addition of 17% general sales tax, which will add Rs27 to it, and inclusion of petroleum levy. However, the decision to set the petrol price after the ending of the subsidy lies with the government.
Moreover, Brent crude settled down $1.68, or 1.6%, at $106.65 a barrel, Reuters reported. US West Texas Intermediate crude declined $1.72, or 1.7%, to $102.07. Global benchmark Brent hit $139 a barrel last month, its highest price since 2008, but both oil benchmarks declined nearly 5% this week on demand concerns.
The minister was responding to a query pertaining to his approach toward the IMF programme and negotiation with the global lender.
Miftah agreed that there should be some targeted subsidy for poor people, citing that life has become difficult, especially in the wake of the Ukraine war and the financial impact of the coronavirus pandemic.
“But nonetheless we cannot afford the [fuel] subsidy that we are currently doing. So we have to curtail this,” he said and expressed his views that the other demands from IMF pertaining to structural reforms and independence of the central bank should not be controversial.
The erstwhile opposition, including Miftah’s PML-N, had opposed PTI’s decision to give autonomy to the State Bank of Pakistan, citing it as an “attempt to mortgage the bank to the IMF”. However, the Imran-led government had defended it as a move to strengthen the economy and the SBP for taking independent decisions.
He added that the country was running a huge loss in the power sector. “Right now the accumulated losses are Rs2,400 billion in the power sector, another Rs1,500 billion I am told in the gas sector. That’s not a good way to run a country really. These are the basic things which we failed to do.”
According to Miftah, such circumstances were part of the reason for the country going back to the IMF programme multiple times. He stressed the need for keeping Pakistan’s focus right.