Thursday July 07, 2022

PBC seeks end to fuel subsidies, cut in consumption

By Our Correspondent
May 19, 2022

KARACHI: A business advocacy group on Wednesday urged the government to immediately withdraw subsidy on fuel and cut consumption of imported fuel as prices rocketed to historical high levels.

Pakistan business council (PBC) said the economy is worsening with depleting foreign exchange reserves, depreciating rupee and rising fiscal deficit.

“April 11 was best to withdraw the general fuel subsidy. Do it now and cut consumption of imported fuel,” PBC twitted.

The government is set to give more than $2 billion in subsidies to the oil and power sectors from April to June, which was announced by ousted Prime Minister Imran Khan in his last days in power, despite soaring global prices, in a bid to win back popular support.

In April, Finance Minister Miftah Ismail said the government had agreed with the International Monetary Fund (IMF) recommendations to reduce fuel subsidies and end a business tax amnesty scheme to restart a $6 billion stalled bailout programme, crucial for the country’s crisis-wracked economy.

The government of Prime Minister Shehbaz Sharif, however, maintained subsidies to keep fuel and power prices steady for consumers, going against IMF recommendations.

A reversal of the fuel subsidies will be politically sensitive for the new government trying to shore up popular support at a time when inflation is running over 12 percent

An uncertainty over the revival of IMF loan programme had kept rupee under pressure as the currency hit record lows in most of the trading sessions during the last one month.

Pakistan is in the midst of a $6 billion IMF bailout programme agreed in 2019 and is yet to clear its seventh review that would release over $900 million and unlock other funding that depends on the fund’s clearance.

The government has started much delayed talks with IMF on Wednesday to resume the seventh review as the country is in dire need of external funds, with foreign reserves falling to as low as $10.3 billion and a widening current account deficit.

The government has already requested the IMF to increase the size and duration of the bailout programme.