The much-hyped petrol concession to the poor may crash even before it could take off and the government might take a u-turn and delay the enforcement of the subsidy scheme. Earlier, the International Monetary Fund (IMF) claimed that it had not been kept in the loop about the decision.
Despite the IMF’s reservations, the newly announced petrol subsidy scheme, which is to be implemented in three phases and would give a relief of up to Rs50 per litre to the poor, received a strategy update from the government. Days before the launch of the programme, the government raised the rates of all petroleum products-all but the negligible light diesel oil-by up to Rs13 per litre for the ensuing two weeks.
The government claimed it had created a two-tier pricing programme that would provide relief to two-wheelers (motorcycles), three-wheelers (rickshaws), and small vehicles by classifying consumers as “poor” and “rich,” according to a report that outlines the pricing strategy behind the Prime Minister’s Petroleum Relief Program.
According to Bloomberg, IMF’s resident representative for Pakistan Esther Perez Ruiz said the government had not consulted the international lender before announcing the subsidy and sought “greater details” about the scheme.
The government had first announced that it would charge Rs50 less for each litre of petrol for low-income people. Later, it increased the subsidy to Rs100 for those having motorbikes and cars of up to 800cc.
The IMF wanted details about the scheme’s operation, cost, target population, and protection against fraud, which it would carefully discuss with relevant authorities.
Ms Ruiz acknowledged that Pakistan had made “substantial progress” in meeting policy commitments for unlocking the loan. However, at the same time, she said Pakistan had a few more tasks to fulfill before it could get the loan, which was needed to reach a staff-level agreement.
The IMF deal is a lifeline for Pakistan if it wants to avoid default.
In case it faces a delay in securing the loan, Pakistan will have to stop repayments.
An American bank, in its report, said that Pakistan’s close ally, China, could rescue Pakistan.
Sri Lanka had recently secured a loan from the IMF, leaving Pakistan as the only South Asian country that has still not won the lender’s confidence in getting the instalment released.
Islamabad has taken several measures to fulfill the IMF criteria. It introduced a mini-budget, raised petroleum prices, increased gas and electricity tariffs, imposed additional taxes and shifted to a market-based exchange rate.
The government had also cut down on various subsidies it had been extending to revive the $6.5 billion IMF loan programme.
How well Prime Minister Shehbaz Sharif’s petroleum relief package for low-income people went down with the IMF has become evident from the postponement of its implementation. From the looks of it, the international lender would not compromise on its conditions.
The present setup is making every effort to win back its vote bank during these pressing times, but it is already treading a path that had been set by the IMF.
The government should keep in mind that in trying to give concessions to its people, it does not end up losing the much-needed loan on which it is direly depending.
