Finance Minister Miftah Ismail on Sunday said the government was not increasing petrol prices “for now”, going back on an important pre-condition set by the International Monetary Fund (IMF) for the resumption of its loan programme.
Ismail said he would talk to the IMF and find a solution, adding that Prime Minister Shehbaz Sharif “is not in favour of putting this burden [increased oil prices] on people.
“I had recommended him to increase [petrol] prices but he said people can’t bear it,” the finance minister said.
He, however, emphasised that petrol prices could be “adjusted anytime in the future” keeping in view international prices.
“I am not saying we will never increase the prices … the point is, we are not increasing them today, but we can adjust them at any time in the future,” he told a press conference in Islamabad.
Right after his media briefing, the minister reiterated his message in a statement on Twitter, saying that the government would not raise petrol prices today. “But due to changing circumstances and international oil prices, we may have to revisit our decision soon.”
Despite not meeting an important ‘prior action’ conveyed to him by the IMF, the finance minister said the government would approach the Fund, hold talks and “conclude them positively”.
Criticising the PTI government, Ismail said it had “promised” the IMF in December that the primary deficit would be Rs25bn and the total deficit would be around Rs4,000bn. “The primary deficit has increased from Rs25bn to Rs1,320bn,” he said, questioning how the new government could cut it down in a few months.
He alleged that the IMF had ended its programme with the PTI government and the latter had been requesting the Fund to not make it 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 okay 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, Ismail added.
He said Pakistan’s delegation would go for the upcoming talks with the IMF mission and added that “we are bound to fulfil the promises that Imran Khan did [with the IMF] since they were the sovereign promises of Pakistan’s prime minister.”
“However, the impossible conditions they’ve agreed to with the IMF [will not be fulfilled],” he said, claiming that former finance minister Shaukat Tarin had committed to increasing petrol levy, along with tax.
“We won’t do this. I know there is a lot of inflation and there will be further inflation if petrol and diesel are made expensive. I’m going to the IMF and will talk to them again and we will find a solution.”
The finance minister said it was “important” to explain how the PTI government had brought the country to a stage where on one hand, commitments were made to the IMF, and on the other hand, petrol prices were kept low.
The finance minister criticised the PTI government’s economic performance on various other fronts, claiming it had failed to reduce expenditure, devalued the rupee, increased imports and failed to hike tax-to-GDP ratio among other things.
He said Pakistan’s imports were about to increase to $75bn and he would soon present suggestions to curtail them. Exports, meanwhile, would be $30bn — leading to a trade deficit of $45bn — and remittances were expected to be $30bn, which would keep the current account deficit to $15bn, he added.
Elaborating on his talks in Saudi Arabia, Ismail said he had met with the Saudi finance minister where two to three issues were discussed.
Firstly, Ismail said he had requested that the Saudi deposits, due for repayment in December, be renewed. He said he was told that the request would be sent to the Saudi royal court for approval.
Secondly, the finance minister said he had urged that the Saudi oil facility be extended. He added that talks were ongoing on this issue.
Thirdly, he said a request was made for additional Saudi deposits. “They have presented an offer which I don’t want to mention at the moment. It is a very positive development but there hasn’t been a final decision so I won’t be able to talk further on it,” Ismail said.
As for talks with the UAE, he said negotiations were ongoing with its team of economic experts.
The announcement from the finance minister comes as the Pakistan Stock Exchange and the rupee have both come under pressure over the past week as the new coalition government has failed to take decisive economic decisions.
Analysts and experts have linked the economic pressure to uncertainty over the continuation of the IMF loan programme coupled with a rising oil import bill and widening trade deficit.
On Friday, the greenback climbed above Rs193 in the interbank market, reaching a new all-time high and breaking its previous day’s record of Rs192. This was the fourth consecutive day the dollar rose to a record high against the rupee.
It has been reported on Wednesday that the most important factor behind the erosion of investor sentiment has been the failure of the new coalition government to come up with a credible plan to take politically tough decisions to fix the economy. For example, it has continuously decided against the reversal of the fiscally unsustainable fuel and energy subsidies, which is the ‘prior action’ that IMF wants it to take before it agrees to restart funding.
In recent meetings with the new finance minister, the IMF has linked the continuation of its loan programme with the reversal of fuel subsidies, which were introduced by the previous government. However, Prime Minister Shehbaz Sharif has multiple times rejected summaries by the Oil and Gas Regulatory Authority and the finance ministry to increase fuel prices.
The PTI had announced a four-month freeze (until June 30) on petrol and electricity prices on February 28 as part of a series of measures to bring relief to the public.
At the time, and even after coming into power last month, the PML-N and other parties part of the new coalition government had severely criticised Imran Khan’s government for “derailing” the IMF programme through unfunded fuel subsidies. But despite being at the helm for over a month, these parties have not reversed the subsidies; although the finance minister has repeatedly said these subsidies are not feasible and are costing the government Rs120 billion a month.
Earlier this month, Ismail said petrol should have been priced at Rs245 per litre according to the agreement the former government did with the IMF. However, the PML-N led government was still selling it at Rs145 per litre and would try its best to maintain that price, he added — a sign that the new government is finding it difficult to take a decision that might be unpopular with its voters.
As per reports, the PML-N was caught up in ‘private consultations’ — a reference to the senior leadership’s trip to london to meet with Nawaz Sharif — as panic continues to grow over its inability to start working on fixing the economy.
The editorial called for the PML-N to firmly decide its future course of action, saying: “It’s time to lead or get out of the way.” With the government deciding not to increase fuel prices again, economic sentiment is expected to continue spiraling downward.
