IMF programme: Finance ministry to sternly oppose petrol subsidy summary

• Ministry of Petroleum prepares draft summary.
• Draft circulated among ministries for comments before ECC meeting.
• Finance ministry official says they were also consulting IMF.

ISLAMABAD: In a bid to fulfil the promises made to the International Monetary Fund (IMF), the Ministry of Finance is all set to sternly oppose a draft summary proposed on the provision of cross-fuel subsidy, according to a report published in The News.

The Ministry of Petroleum prepared the draft summary and circulated it among different ministries for comments before the upcoming Economic Coordination Committee (ECC) meeting expected after the Eid ul Fitr holidays.

Under the subsidy, the petroleum product prices will be hiked by Rs75 per litre for all vehicles of 1,000cc and above for subsidising petrol to 800cc vehicles and motorbikes.

An official from the finance ministry said that the petrol scheme was still at the draft stage. 

The Petroleum Division had moved a draft summary to the ECC for comments, as per practice. “We are preparing our comments and also consulting the IMF. It is nowhere near approval,” he said, adding that the response of the Ministry of Finance would be known to everyone soon.

The official recalled that such a scheme had been proposed during the Pakistan Tehreek-e-Insaf (PTI) government but could not be implemented.

Former finance minister Miftah Ismail also allocated Rs48 billion on account of the Sasta Petrol Scheme in the last budget, but these resources were diverted towards flood affected-areas.

Such a scheme cannot be implemented in a transparent manner in Pakistan and the ministry would send its official comments soon, he said.

In March, Prime Minister Shehbaz Sharif announced the government's plans for fuel pricing. While economists warned the decision could hinder a crucial IMF payout needed to prevent economic collapse, the government said that it was a scheme, not a subsidy.

The IMF officials were quick to share that the Pakistani government did not consult the global lender on its petrol subsidy for low-income groups before the announcement.

Earlier, The News reported that the Fund has asked the Pakistani authorities to provide more details about the petrol relief package causing more delay in the signing of the staff-level agreement.

The half-baked cross-fuel subsidy proposal by the petroleum ministry has failed to convince the Fund, which has rejected the initial plan arguing that more details are required to verify its sustainability.

Pakistan has been trying to convince the Washington-based lender to release the next tranche of the bailout programme since the IMF funding stalled in November, hit by snags over fiscal policy adjustments after officials of the lender visited Islamabad in February for talks.

They formed part of a ninth review exercise on a bailout package of $6.5 billion agreed upon in 2019 whose resumption is critical for Pakistan to avoid risking default on external payment obligations.