Cannot bear burden of subsidy on petroleum prices, says Miftah ahead of IMF meeting

Newly-appointed finance minister Miftah Ismail on Wednesday said that the government cannot sustain the subsidy on petroleum products that is being provided to keep prices stable, expressing confidence, however, that the crucial International Monetary Fund (IMF) programme would be revived.

The Economic Coordination Committee (ECC) of the Cabinet recently approved Rs68.81 billion as a supplementary grant for disbursement of price differential claims (PDCs) to OMCs/ refineries for the month of April and to meet the shortfall of Rs1.87 billion for the month of March 2022.

The Oil and Gas Regulatory Authority (OGRA) has projected that this expense will shoot up to Rs96 billion in May and June.

“This is double the amount needed to run a civilian government — we cannot sustain this subsidy, but the prime minister needs to take a decision on this,” said Miftah.

Miftah slams ex-finance minister's comments on state of economy

Imran Khan, the former prime minister, announced a freeze in rates of petrol prices on the last day of February. However, since then, prices in the international markets have increased massively, putting a strain on finances of net oil importers like Pakistan. This has also reportedly irked the IMF, which has asked Pakistan to explain how it intends to finance the subsidy amount.

While Khan was ousted through a no-confidence vote earlier this month, Shehbaz Sharif, the new premier, also decided to maintain prices of petroleum products, seen largely as a populist measure and a drain on Pakistan's finances.

Current account deficit

Meanwhile, addressing a press conference alongside Minister for Information and Broadcasting Marriyum Aurangzeb after the cabinet meeting on Wednesday, Miftah also shared various economic indicators, saying that exports have increased due to the rupee's fall.

"Exports have increased but it is mostly to do with the price effect. Meanwhile, the imports have increased by twice the amount of exports, and will hit $75 billion this year.

“Even if we add the remittance figures, the current account deficit is expected to cross $20 billion,” said Miftah.

IMF programme

Talking about the IMF programme, Ismail expressed confidence that the Extended Fund Facility (EFF) will be revived.

"We will seek revival of the IMF programme, and we will, God willing, do belt tightening, and cut PSDP (Public Sector Development Funds)."

Miftah said he would be travelling to Washington later in the day to attend an IMF meeting.

Pakistan is waiting for the IMF to resume talks on its seventh review of the $6 billion rescue package agreed in July 2019.

“We will bring a disciplined budget. It will be a pro-people and pro-industry announcement,” he said.

Commenting on the shortage of fertiliser, the finance minister said that the smuggling of agri-inputs and wheat to other countries has caused a shortage of the commodity in Pakistan. He said the government has decided to constitute a commission to investigate smuggling.

Meanwhile, Marriyum while briefing the media informed that the federal cabinet has approved reduction in prices of sugar and flour for provision of relief to people during Ramazan.

She said the prime minister's direction for price reduction of 10-kilogramme flour from Rs550 to Rs400 during Ramazan was accorded approval.