IMF pre-condition: Pakistan considering slashing POL prices review time to a week

ISLAMABAD: The federal government is considering revising the existing fortnightly (15-day) review process of the petroleum products prices to a weekly basis. This is a pre-condition of the International Monetary Fund (IMF) to revive the already-stalled $6 billion loan programme and open the way for Islamabad to global bond markets.

Currently, the government is reviewing and changing the POL price twice a month. Due to the long period, the price changes in the international market were not fully translated to the local market and, therefore, there was a need to reduce the time. The Fund is also advocating deregulation of POL prices but it will take time, an official told The News Thursday. The federal cabinet in its next meeting will take the final decision on this plan, he added.

The previous government and the IMF had signed a 39-month Extended Fund Facility (July 2019 to September 2022) with a total value of $6 billion. But, due to the government’s failure in fulfilling the commitments with the Fund, the programme remained stalled for most of the time and half of the total programme remained undisbursed. The Fund is yet to hold the seventh and eighth reviews. Officials said revision of oil prices determination to a week was a pre-condition of the IMF for holding these reviews.

It may be noted that the agreement had been expected in October 2020 but was delayed due to previous Prime Minister Imran Khan’s refusal to accept belt-tightening measures at the peak of Covid-19.

Earlier, the POL prices were revised on a monthly basis, which was later reduced to fortnightly by the previous government, and now it is being further reduced to a week to pass on the impact of international oil prices to local consumers immediately.

The country increased the petroleum development levy on July 31 as per the agreement reached with the Fund, the official said. The federal government had also revised the prices of petroleum products for the next fortnight from August 1, increasing the PDL on petrol by Rs10-20 and diesel by Rs5-10 per litre.

It is interesting to note that the IMF’s Resident Representative for Pakistan Esther Perez Ruiz in a statement on Aug 2 said Pakistan had completed the last pre-condition by increasing the Petrol Development Levy (PDL) for the combined seventh and eighth reviews to get the next tranche of $6 billion loan programme.