WASHINGTON: Finance Minister Miftah Ismail has said that the government will have to increase the price of gasoline to get Pakistan’s economy back on track and to revive the stalled bailout programme with the International Monetary Fund (IMF).

Speaking at the Atlantic Council, a think tank, on Friday evening, the minister also said that the new government was ready to withdraw the fuel subsidies given by its predecessor.

The minister arrived in the US capital on Thursday evening for the spring meetings of World Bank Group, which includes the IMF. On Friday, Mr Ismail, a former IMF official, had his first meetings with senior IMF officials as Pakistan’s new finance minister.

“They’ve talked about removing the subsidy on fuel. I agree with them,” he said at the Atlantic Council. “We can’t afford to do the subsidies that we’re doing. So, we’re going to have to curtail this.”

The minister accused former prime minister Imran Khan of setting a “trap” for his successors by announcing heavy subsidies on fuel weeks before his ouster.

Miftah expresses inability to continue subsidy on petroleum products, says Imran laid ‘trap’ for govt

In 2019, the IMF approved a $6 billion loan for Pakistan but concerns about the pace of IMF-mandated reforms have delayed its disbursements.

Mr Ismail said he was looking forward to an early agreement with the IMF on the seventh review of the loan package. The sixth review was completed in February, when the IMF also agreed to immediately release $1bn for Pakistan.

“The only aim of the government is to bring economic and fiscal stability,” Mr Ismail said at the council. “Measures will also be taken phase-wise to increase exports of the country.”

Soon after his appointment, the fina­nce minister had said that the subsidy allowed on petrol for May and June would cost Rs96 billion, and the “government cannot bear this burden”.

Bloomberg report

A US financial wire, Bloomberg, reported earlier this week that the ongoing fuel shortage had forced “cash-strapped Pakistan to cut power to households”. The report said that almost a fifth of electricity generation capacity was offline because Islamabad “cannot afford to buy coal or natural gas from overseas to fuel its power plants”.

The report claimed that Pakistan also was struggling to procure fuel from the spot market after prices of liquefied natural gas and coal surged to record level last month as the war in Ukraine exacerbated supply shortfalls.

Pakistan’s energy costs more than doubled to $15 billion in nine months, and it isn’t able to spend more on additional shipments.

The report warned that the electricity crunch was complicating the already tough economic challenge for the new government.

“A relatively poor nation that’s highly dependent on energy imports, Pakistan has been hit especially hard by rising fuel costs,” the report added.

In his address to the council, the finance minister highlighted the economic agenda of the new government aimed at bringing economic and fiscal stability to the country by encouraging recovery and growth.

The government, however, will ensure that this growth was all-inclusive and benefited the poor segments of society, he said.

Mr Ismail indicated that in his meeting with IMF officials, he had also agreed to pursue structural reforms to boost a crisis-wracked economy.

The minister claimed that the previous PTI government had left landmines for its successors by not taking tax on petrol and diesel.

“Imran Khan has put the new government in trouble,” he said, adding that “making petrol cheap is not a favour, it is the nation’s money through which they give subsidies.”

Mr Ismail said the government was giving a subsidy of Rs52 on diesel and Rs21 on petrol, forcing it to pay Rs68bn from the national exchequer just for April’s subsidy.

Pakistan, he said, was the world’s fifth-most populous nation but the subsidies it gave mostly benefited the rich. 

“We have such an elite-benefiting country that almost every subsidy that you can speak of actually goes to the richest people,” he said.

Published in Dawn, April 24th, 2022