The Ministry of Finance is reportedly preparing to strongly object to a preliminary summary on providing cross-fuel subsidies to maintain its commitments to the International Monetary Fund (IMF).
The Ministry of Petroleum has drafted the summary and circulated it among other ministries for feedback before the upcoming Economic Coordination Committee (ECC) meeting, set to occur after the Eid ul Fitr holidays.
The subsidy proposal suggests increasing the prices of petroleum products by Rs75 per liter for vehicles with an engine displacement of 1,000 CC or more to subsidize fuel costs for vehicles with an engine displacement of 800 CC or less.
According to a finance ministry official, the diesel scheme is still in the planning phase. The Petroleum Division had submitted a preliminary summary to the ECC for consideration. The official said, “We are formulating our comments and consulting with the IMF. It is a long way from approval.” The Ministry of Finance’s response is expected to be released soon.
The official also mentioned that a similar plan had been proposed during the Pakistan Tehreek-e-Insaf (PTI) administration but was never implemented.
In the previous budget, former finance minister Miftah Ismail allocated Rs48 billion for the Sasta Petrol Scheme, but these funds were later redirected to flood-affected areas.
The official stated that implementing such a scheme transparently in Pakistan would be difficult and that the ministry would soon send its official response.
Prime Minister Shehbaz Sharif announced the government’s plans for fuel pricing in March. Despite warnings from economists that the decision could jeopardize a critical IMF payment needed to avert economic disaster, the government maintained that it was a program, not a subsidy.
IMF officials revealed that the Pakistani government did not consult with the global lender before announcing its petrol subsidy for low-income groups.
Previously, the Fund had asked for more information about the petrol relief package from Pakistani authorities, delaying the endorsement of the staff-level agreement.
The Fund was not convinced by the petroleum ministry’s cross-fuel subsidies proposal, rejecting the initial plan and requesting more information to assess its feasibility.
Pakistan has been trying to persuade the Washington-based lender to release the next installment of the bailout program since November, when IMF funding stalled due to disagreements over fiscal policy adjustments.
IMF officials visited Islamabad in February for talks as part of a ninth review of a $6.5 billion bailout package agreed upon in 2019. The resumption of this package is crucial for Pakistan to avoid defaulting on its external payment obligations.
