Govt will have to further increase POL prices to secure IMF programme

ISLAMABAD: The government will have to further increase per litre price of petrol and diesel by around Rs23 and Rs55 respectively to revive the IMF programme.

Informed sources said after two consecutive raises of Rs30 per litre each for petrol and diesel during the last fortnight, the government is expected to completely abolish subsidy on POL products before the start of the new fiscal year.

In view of the existing oil price in the international market, the subsidy on petrol is Rs23 and diesel Rs55. The final calculation will be done by the OGRA next week when it will send its recommendations for new oil price to the prime minister.

After two recent huge raises in oil prices -- Rs60 per litre increase in petrol and diesel prices -- and following the presentation of IMF-cleared budget for the fiscal year 2022-23, it is generally believed that all pre-conditions for the revival of the IMF programme have been met and now the Fund will give the green signal anytime. But, this is not the case.

One major hurdle, it is said, is the complete withdrawal of oil subsidies before the start of the new fiscal year. The sources said that after the last increase, per litre subsidy was Rs9 for petrol and around Rs23 for diesel. Now, the subsidy has gone up because of increase in oil prices in the international market.

These are really difficult times for the Shehbaz-led coalition government as generally it is considered that the difficult decisions have already been taken i.e. Rs60 per litre increase in petrol and diesel prices. But, now the latest calculations pose a much serious challenge where the government will have to further raise the petrol price by Rs23/litre and diesel by Rs55/litre before the end of the current fiscal year.

Without an end to oil subsidy, the IMF is not showing any leniency. Pakistan faces a critical economic situation where it has no option but to secure the IMF programme which was suspended during the last few months of the Imran government for violating what the then government had agreed with the Fund. The Imran Khan government’s decision to lower the prices of petrol and diesel through huge subsidies was a major violation of what the PTI government had signed with the IMF.