ISLAMABAD: The government, set to approve Rs52bn payments to oil companies on Monday against price differential claims for the past 15 days, left oil prices unchanged on Sunday. However, the finance minister insisted that a price hike could come any time.

The finance ministry also confirmed the development in a notification issued late night on Sunday.

Speaking at a news conference just two days before opening formal talks with the International Monetary Fund (IMF) for a bailout, Finance Minister Miftah Ismail said his predecessor, Shaukat Tarin, had given commitments to the Fund not to give “any subsidy”, and impose Rs30 per litre petroleum levy and 17pc GST.

“At this rate, the petroleum prices should have been Rs150 per litre higher than they are today, but we will not do that. That will further increase the rate of inflation,” he said.

Mr Ismail said he would again talk to the IMF and find some middle path, hinting at a gradual price adjustment. He said even though he had requested an increase in petroleum prices, “the prime minister did not agree to do it today”.

Miftah insists decision may be revisited soon due to changing circumstances, global market

As news channels ran headlines about his announcement to keep the prices unchanged, the finance minister appeared to have realised its impact on talks with the IMF and an already jittery market. He took to Twitter to reiterate: “Let me amplify what I just said in my presser. The government will not raise POL [petroleum, oil and lubricants] prices today. But due to changing circumstances and international oil prices, we may have to revisit our decision soon.”

Officials close to Mr Ismail said a single-point meeting of the Economic Coordination Committee of the Cabinet had been called on Monday (today) to approve immediate payment of Rs52bn to oil companies on account of price differential claims for May 1 to 15 to compensate for petroleum products they sold cheaper than imported cost.

Skirting landmines

The minister said that between December and the time the new government took over last month, the financial gap of Rs1.32 trillion was created by Imran Khan in the shape of a primary deficit — the difference between revenues and expenditures minus interest payments — despite a Rs25bn primary surplus commitment under the deal with the IMF finalised by Mr Tarin in December.

These were the landmines the previous government laid when Imran Khan reduced electricity rates by Rs5 per unit and petroleum rates by Rs10 per litre, he said, adding that global crude oil prices had jumped from $85 a barrel at the time to over $108 now. By doing so, the previous government had not damaged the Pakistan Muslim League-Nawaz (PML-N) but played havoc with the national economy, he said.

“We have to honour all their commitments” because these are sovereign commitments, he said about IMF conditions, but then hastened to add that promises they made to block China-Pakistan Economic Corridor (CPEC) had no chance to stand.

Mr Ismail said former minister Asad Umar and others in the Pakistan Tehreek-i-Insaf (PTI) were taunting the government for the rupee’s devaluation but forgot that the exchange rate had come down from Rs189 in PTI’s last days to Rs182 when the coalition government took over last month. “If devaluation was good from Rs115 to Rs189 in four years, why it is suddenly bad now for a couple of rupees?” he said.

The finance minister said the IMF had called off its programme with the PTI government by the end of March due to violations of commitments, but the then economic managers had requested the Fund not to make in public. “I went to the IMF as soon as I came and asked them to start talks with us. They said give us a political commitment and I said we are ready to extend the programme by a year. They said, ‘OK, let’s talk then’.”

The finance minister said he had requested the IMF that since the programme would be extended, a further $2bn should be added. The Fund said they would discuss it, he said, adding that a delegation led by the finance secretary would fly to Doha for technical-level talks with the IMF and then he would also join.

‘Productive meetings in S. Arabia, UAE’

The minister denied reports that friendly countries had not extended financial support. He said the Pakistani delegation had productive meetings with the Saudi leadership, including Mohammed bin Salman. He said the Pakistan side got assurance from Saudis for rollover of $3bn in safe deposit when it matures in December but stressed that this was something to materialise by year end.

Secondly, Islamabad wanted to double oil financing from $100 million a month at present in line with an increase in international oil prices and they promised to do it through the Opec fund, Exim Bank or Islamic Development Bank. Discussions were in progress on this count, he added.

Third, Pakistan also desired a further fresh deposit from Saudi Arabia, for which they have given us a very good offer but he would not talk more on the subject at this moment, he said.

Regarding the United Arab Emirates, he said Prime Minister Shehbaz Sharif had discussed the matter and a bilateral committee had been constituted through which some information had been sought. This might take a few days because of ongoing mourning after the death of UAE President Sheikh Khalifa bin Zayed Al Nahyan.

‘PTI govt destroyed economy’

The finance minister said it was important to explain how the PTI government had brought the country to a stage where, on the one hand, commitments were made to the IMF, and on the other, petroleum prices were kept low. Not only this, the previous government destroyed the foundations of the economy, he said.

Pakistan was a wheat and sugar exporting country when the PML-N left four years ago, but since then, the PTI had turned the situation the other way round, he said, adding that the country would be importing three million tonnes of wheat. In the first year after the PML-N’s last tenure, the PTI government exported sugar at Rs48 per kg and imported it at Rs96 per kg, Mr Ismail said.

The production of all commodities went down in the last four years because people with fake qualifications were given positions in the food ministry on the orders of a lady who also arranged corrupt inspectors in Attock to facilitate the smuggling of wheat, sugar and subsidised urea to Afghanistan and beyond.

The minister said the previous government failed to reduce expenditure, devalued the rupee, increased imports and failed to raise the tax-to-GDP ratio, among other things. Instead, they resorted to jugglery of numbers by separating various departments from Prime Minister Office to show lower expenses when actual expenses were booked elsewhere, he said.

The finance minister said Pakistan’s imports were about to increase to $75bn against exports of just $30bn, leaving a trade deficit of $45bn.

He said exports in the first three years of PTI were lower than the last year of PML-N but this year these would be higher by 25pc mainly because of the price effect rather than export growth. The current account deficit, he said, would be around $15bn, while remittances were expected to touch $30bn during this fiscal year.

Published in Dawn, May 16th, 2022