- Finance minister says no final decision on raising prices of petroleum products, but says wealthy could be asked to make 'contribution'
Finance Minister Miftah Ismail once again slammed the previous government's economic policies, coming down hard specifically on untargeted subsidies and tax amnesty schemes for the real estate and industrial sectors, which he said had raised Islamabad's need to borrow money and crowded out private-sector lending.
"The government announced a real estate amnesty scheme two-and-a-half years ago. They didn't ask (the International Monetary Fund) for subsidy on medicines or milk powder," said Ismail during his press conference on Thursday afternoon.
"After that, they announced an amnesty for the industrial sector without even talking to the IMF. Then, they gave a fuel subsidy. All these are landmines for the economy.
"Because of this, we need to borrow money from the banks. This untargeted subsidy, favouring the wealthy, has now forced us to go to the wealthy again to borrow money at 15%," added the finance minister, stressing that due to this investment drops, which hits labour the most through rupee-depreciation and inflation.
Ismail also blamed the Pakistan Tehreek-e-Insaf (PTI) government for implementing decisions that contradicted what was agreed during meetings with the IMF.
"Imran Khan has left difficult decisions for us to make. Prime Minister Shehbaz Sharif has no intention to increase the burden on the poor-income groups. But we can take in a contribution from the wealthy," said Ismail, hinting that a targeted fuel subsidy may still be in the offing.
"But we aren't making a decision on it today. It's decided every 15 days.
“No government can afford to sell petrol on a loss. On diesel, the government is suffering losses to the tune of Rs70 per litre. However, as per promises made to the IMF by the previous government, Rs30 levy should be imposed on it, in addition to sales tax,” he said.
Ismail said that in May alone the government will bear losses of Rs102 billion on account of fuel subsidies.
Fuel prices has become a matter of hot debate in Islamabad as Pakistan has agreed with the IMF to raise rates, as it looks to move ahead on talks over the stalled Extended Fund Facility (EFF). The IMF programme, put on hold with the change in government, is crucial to Pakistan as its foreign currency reserves have dropped to under two months of import cover.
Revival of the programme paves way for a $900-million tranche, with Islamabad also seeking an extension in duration and size of the $6-billion EFF.
Meanwhile, Ismail said the previous PTI government has left the power sector in shambles with circular debt in the gas sector hitting Rs1,500 billion, while in the energy sector the amount has topped Rs2,600 billion.
The finance minister also claimed that power plants, which could produce 7,500-megawatts, remained shut during the PTI government's tenure because they did not have fuel while 2,000MW power plants were closed because of lack of maintenance.
Talks with the UAE and Saudi Arabia
In response to a question on talks with Saudi Arabia and the UAE amid reports of an economic package from the two friendly countries, Ismail said meetings and technical-level discussions are ongoing.
"We got a good response in talks with Saudi Arabia. In the UAE, Prime Minister Shehbaz Sharif held talks. On Eid day, the UAE delegation met the premier.
"Eid holidays means this will take a bit of time," added Ismail.