May 17, 2022 (MLN): Pakistan and the International Monetary Fund (IMF) are scheduled to begin review talks in Doha from Wednesday, May 18, 2022 (tomorrow), for a week to discuss the release of the remaining $1 billion tranche under the Extended Fund Facility (EFF).
The talks are part of the ongoing 7th review of the Extended Fund Facility that Pakistan signed in July 2019.
In this regard, the key concerns will be the increase in revenue collections and the removal of subsidies on petrol and electricity.
Earlier, the finance minister said that the IMF wants fuel prices raised to break even and taxes restored, amnesty scheme discontinued for industries, circular debt reduced, power rates increased and fiscal savings ensured.
On February 28, former prime minister Imran Khan announced a relief package for inflation-burdened consumers, under which prices of petrol and diesel were reduced by Rs10/liter each from March 1, 2022, and fixed at those levels till the end of this fiscal year.
Due to this fixation, the rate of Petroleum Levy and Sales Tax on petroleum and diesel was brought down to zero percent.
From May 1 to May 15, the government has provided Rs 29.60 per litre subsidy on petrol, Rs73.04 per litre subsidy on diesel and Rs43.16 on kerosene.
The current price of petrol stands at Rs149.86 per litre, whereas the per litre prices of high-speed diesel, kerosene oil, and light diesel stand at Rs144.15, Rs125.56, and Rs118.31, respectively.
Accordingly, if the prices of petroleum products are not increased, the government will bear the Price Differential Claim (PDC) on the prices of MS at Rs47.02/litre, HSD at Rs86.71/litre, SKO at Rs51.83/litre, and LDO at Rs.67.84/litre.
The total subsidy amount in the first fortnight of May is around Rs55 billion. In the second fortnight, it will be around Rs70 billion.
The International Monetary Fund (IMF) emphasized the need to reverse the unfunded subsidies which are the prior conditions for the ongoing $6 billion loan program. The government had assured the fund that it will increase the prices of petroleum products to fulfil this commitment. Despite the assurance, the incumbent government has not increased the prices of petroleum products yet, apparently due to political backlash.
Taking to his Twitter handle, Finance Minister Miftah Ismail on Sunday clarified, “Due to changing circumstances and international oil prices, we may have to revisit our decision soon.”
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