Amid renewed hopes for IMF deal: Govt may hike petroleum levy to Rs55/litre from July 1

ISLAMABAD: Amid the possibility of moving towards a broader agreement with the IMF on a fresh bailout package, the government is considering jacking up the Petroleum Development Levy (PDL) on petrol and diesel from Rs50 to Rs55 per litre with effect from July 1, 2023.

Although the government seems confident about clinching the IMF agreement on a fresh Standby Arrangement (SBA) for a shorter period of six to nine months, it will have to hike the PDL from Rs50 to Rs55 per litre from the start of the next fiscal year i.e. July 1, 2023.

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) through which the government is empowered to hike the petroleum levy.

Earlier, it required approval of parliament to fix the maximum limit of petroleum levy. Now the Ministry of Finance had 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 has the government received 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 Extended Fund Facility or to the fresh SBA programme.

Pakistan and the IMF held consultations on Tuesday night to take a final decision on two options. With diminishing chances for accomplishing the Ninth Review under the $6.5 billion EFF program, which will end tomorrow (Friday), Pakistan and the IMF would have to enter into a fresh bailout package under the SBA programme of $2.5 billion for the next six to nine months period. It is must to avert a balance of payment crisis and default over the next six months period.