KARACHI: Pakistan is drafting a fuel pricing scheme aimed at helping the poor, the petroleum minister said, a programme that some economists fear could hinder a crucial International Monetary Fund pay out needed to prevent economic collapse.
There were reports on local media on Wednesday with claims that the government had scrapped the programme realizing it was unfeasible.
Prime Minister Shehbaz Sharif first announced the government’s plans for the fuel pricing last week.
On Thursday, news agency Reuters quoted Petroleum Minister Musadik Malik as saying that his ministry had been given six weeks to draft the relief package, which envisages charging affluent consumers more for fuel, and using that money to reduce prices for the poor who have been hit hard by inflation, which in February was at its highest in 50 years.
“It is not a subsidy. It is a pricing scheme. It is a relief programme for the poor,” Malik said. A ministry spokesman said the price difference would be in the range of 100 Pakistanirupees (around 30 U.S. cents) a litre for the rich and the poor.
With enough foreign reserves to only cover about four weeksof necessary imports, Pakistan is desperate for the IMFagreement to disperse a $1.1 billion tranche from a $6.5 billionbailout agreed in 2019.
The government has implemented several fiscal measures,including devaluing the rupee, lifting subsidies and raisingenergy prices as preconditions for the agreement, which thefinance minister said this month was “very close”.
The resident IMF representative, Esther Perez Ruiz, saidthis week that the government did not consult the fund about thefuel pricing scheme.
She said the fund would ask the government for more detailsabout the proposal, including how it will be implemented andwhat protection would be put in place to prevent abuse.
Asked about the IMF’s concerns, Malik said the scheme wasnot a subsidy. “We haven’t heard any concerns from the IMF,” hesaid. “It is same like we did in the gas sector, and that wasokay with the IMF,” he added.
Earlier this year, the government implemented differentprices for natural gas based on the amount of fuel consumed.
Economists said the scheme could derail the progressPakistan had made so far in negotiations with the IMF.
“It seems this was not discussed with the IMF and,therefore, could delay the staff level agreement,” saidformer central bank deputy governor Murtaza Syed.
