Hike in petroluem levy likely from July 1 as govt pins hope on IMF deal

• IMF's Extended Fund Facility programme expiring tomorrow.
• Five rupee hike expected in PDL amid hopes of IMF deal.
• Staff level agreement couldn't be signed sans bigger deal on MEFP.

ISLAMABAD: Amid the renewed hopes for a broader agreement with the International Monetary Fund (IMF), a Rs5 hike is expected in the Petroleum Development Levy (PDL) on petrol and diesel with effect from July 1, 2023, The News reported.

With diminishing chances for accomplishing the ninth review under the $6.5 billion Extended Fund Facility (EFF) programme, expiring tomorrow (Friday), Pakistan and the IMF would have to enter into a fresh bailout package under the Standby Arrangement (SBA) of $2.5 billion for the next six to nine months period.

As per the report, the government is mulling jacking up the petroleum levy from Rs50 to Rs55 per litre of petrol and diesel as it hopes to move closer to clinching the fresh SBA programme with the lender, which is a must to avert a balance of payment crisis and default over the next six months period.

Despite the possibility of securing the IMF deal, the government will have to jack up the PDL from the start of the next fiscal year.

Through the Finance Act 2023-24, the government sought powers for amendment of the Petroleum Products (Petroleum Levy) Ordinance, 1961 (XXV of 1961) in the Fifth Schedule, in column (1), which empowers it to hike the petroleum levy.

Earlier, it required approval of parliament to fix the maximum limit of petroleum levy.

Now the Ministry of Finance has informed the Senate Standing Committee on Finance that the petroleum development levy was worked out at Rs60 per litre for achieving its target of Rs879 billion in the next fiscal year, against the revised target of Rs542 billion for the outgoing financial year 2022-23 ending on June 30.

The question arises when the government will receive the Memorandum of Economic and Financial Policies (MEFP) for the fresh bailout package under the SBA programme for the next six to nine months.

Without a broader agreement on MEFP, the staff-level agreement could not be signed.

Pakistani authorities claimed that both sides exchanged draft MEFP several times, but it was not yet clear whether it was related to the Ninth Review of the expiring EFF or the fresh SBA programme.

On Tuesday, Pakistan and the IMF held consultations to decide on two options.