Musadik Malik, Minister of State for Petroleum, dismissed the International Monetary Fund’s (IMF) objections to the proposed petrol subsidy plan, claiming it would not harm the loan arrangement.
Malik claims that by using the example of a differential petrol pricing mechanism, the IMF might be persuaded of the suggested scheme. However, Pakistan is currently encountering difficulties in restarting the $6.5 billion loan programme that has been halted for months, and yielding to the Fund’s demands has produced problems for the people.
The economy has suffered due to the delay in the delivery of the $1 billion tranche. The IMF expressed alarm about the petrol subsidy scheme, claiming it was issued without consulting the government.
In support of the plan, Malik noted that the government has already introduced differential petrol pricing, with the rich paying higher rates and the poor paying lower prices. The finance ministry has responded to the IMF’s two questions on cross-fuel subsidy procedures, providing details to satisfy the lender.
Malik pledged that the government would not jeopardise the IMF programme and hoped that the Fund could be persuaded of the details of the planned cross-fuel subsidy based on the gas sector’s pattern. The minister clarified that the identical brief was written last month when the prime minister gave his preliminary approval and that the finance ministry was in contact with the IMF.
However, sources have indicated that the proposed cross-fuel subsidy for petrol prices may be difficult to implement transparently because it is not piped gas like the gas sector, where pricing may be based on use.
The incomplete cross-subsidy has caused delays in reaching a staff-level agreement with the IMF, and it is unclear how the lender would react to it.