Pakistan steeply hikes petroleum prices under deal with IMF to revive bailout programme

Prices of all petroleum products went up by about Rs. 14-19 per litre [Pakistani Rupees] after the decision came into effect from midnight on June 30.

Pakistani rickshaw drivers chant slogans during a protest against the recent increasing in petrol prices. File | Photo Credit: AP

The Pakistan government has steeply hiked petroleum prices to implement the tough preconditions set by the International Monetary Fund (IMF) to revive the stalled $6 billion bailout package for the cash-strapped country.

Prices of all petroleum products went up by about Rs. 14-19 per litre [Pakistani Rupees] after the decision came into effect from midnight on June 30.

According to a notification issued by the Finance Ministry, the government imposed a Rs. 10 per litre petroleum levy on petrol and Rs. 5 each on high-speed diesel (HSD), kerosene and light diesel oil (LDO). As a result, the per-litre price of petrol has been increased by Rs. 14.85, HSD by Rs. 13.23, kerosene by Rs. 18.83 and LDO by Rs. 18.68.

The ex-depot price of petrol now stands at Rs. 248.74 per litre, HSD at Rs. 276.54, kerosene at Rs. 230.26 and LDO at Rs. 226.15. Finance Minister Miftah Ismail told the media that the petroleum levy was imposed to revive the IMF programme suspended four months ago after the previous government led by Imran Khan reneged from signed agreements.

This is the fourth hike in petroleum under the incumbent government which took power in April. The IMF has set tough preconditions such as hiking electricity tariffs and imposing a levy on petroleum products to revive the stalled bailout programme.

The IMF Fund also asked Pakistan to set up an anti-corruption task force to review all the existing laws that were aimed at curbing graft in the government departments.

After implementing the conditions, the IMF would present Pakistan’s request for the approval of the loan tranche and revival of the programme to its executive board – a process that may consume another month.

Cash-strapped Pakistan is facing growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.

On June 22, Pakistan secured a deal with the IMF to restore the stalled $6 billion assistance package and unlock doors for financing from other international sources.

The make-or-break deal was reached following the IMF staff mission and the Pakistani team, led by Finance Minister Ismail, agreeing on an understanding on the 2022-23 budget after the authorities committed to generate Rs. 43,600 crore more taxes and increase petroleum levy gradually up to Rs. 50 per litre, the Dawn newspaper reported.

The extended fund facility package of $6 billion was agreed upon in July 2019 for a period of 39 months. So far only half of the promised money has been reimbursed. The revival of the facility will immediately provide access to $1 billion, which Pakistan badly needs to buttress its dwindling foreign exchange reserves.