Islamabad, June 16: The Pakistani government has hiked fuel prices by up to 29%, scrapping fuel subsidies in a bid to reduce the budget deficit and secure critical IMF support for the cash-strapped economy .
This is the third reduction in fuel subsidies by the government led by Prime Minister Shehbaz Sharif in about 20 days.
The new prices took effect from midnight Wednesday and showed a massive rise of Rs 24 per liter in petrol prices and Rs 59.16 per liter of high speed diesel (HSD) – the two used by everyone directly or indirectly, Finance Minister Miftah Ismail said.
The latest rise came on top of an already Rs 60 rise in oil prices since May 25. The new price of petrol has been set at Rs 233.89 per litre, HSD at Rs 263.31 per liter and kerosene at Rs 211.47 per litre.
He said that the prices of all products had now been reduced to their purchase price and that the element of subsidy or alleged price difference had been eliminated. “There is no longer a loss for the government on the sale of petroleum products,” he said, hoping to strike a deal with the International Monetary Fund to restart loan support.
On Thursday, Prime Minister Sharif defended the unpopular measures, saying the government had “no choice” because of “those who struck the worst deal ever” with the IMF.
Finance Minister Ismail also accused Imran Khan’s previous government of reaching a flawed IMF deal that tied the incumbent’s hands and forced him to raise oil prices to get the economy back on track. right way.
“If we don’t raise oil prices, the country could face default,” he said, admitting that the middle class would suffer from higher oil prices.
After the new prices, the government finally removed all oil subsidies, which was a key request from the IMF to restore the $6 billion aid package signed in 2019.
However, the IMF was not satisfied with some other measures announced in the June 10 budget, including one on tax relief for employees.
The Dawn newspaper, citing official sources, reported that the government has decided, in principle, to roll back the drastic tax relief given to the working class. According to the official, the revised tax brackets and other proposals have been submitted to the IMF.
“Technical-level talks will begin in the coming days,” the official said, adding that they would “try to protect the working class falling to the lower slabs.”
The IMF representative in Islamabad also confirmed that they were in “discussions with the authorities…to obtain more clarity on certain revenue and expenditure items”. Responding to written questions shared by Dawn, IMF Resident Representative Esther Perez Ruiz said, “We take note of the submission of the draft budget to the National Assembly last Friday.”
However, she maintained that according to the IMF’s preliminary estimates, additional measures will be needed to strengthen the budget and align it with the main objectives of the program.
“IMF staff stands ready to continue to support the authorities’ efforts in this regard and, more generally, in the implementation of policies aimed at promoting macroeconomic stability,” she said.
In the budget, the government had unexpectedly given major tax rate relief to people with higher salaries by reducing the top tax rate from 35% to 32.5%. The proposed budget also reduced the number of slabs from 12 to seven. (PTI)