ISLAMABAD: Pakistan on Saturday went against the International Monetary Fund’s (IMF) recommendation to do away with subsidies and kept the fuel and power prices in the country unchanged.
The IMF said on Monday Pakistan had agreed to roll back unfunded subsidies to the oil and power sectors ahead of the resumption in May of a review under the $6 billion loan program signed in July 2019.
However, the finance ministry said on Saturday that Prime Minister Shehbaz Sharif had rejected a summary by the Oil and Gas Regulatory Authority (OGRA) to increase the prices of petroleum products and directed it to keep them unchanged.
"In the fortnightly review of petroleum products' prices, the prime minister has rejected the proposal of OGRA for increase in prices of petroleum products and directed to maintain the prices of petroleum products at the current level so as not to burden the consumers with the hike in prices," the finance ministry said in a statement.
An IMF mission is due to arrive in Pakistan this month to resume discussions over policies for completing the seventh review of the country’s Extended Fund Facility (EFF).
Islamabad has already asked the international financial institution to increase the size and duration of the EFF program.
“We have asked the IMF to extend the EFF from three to four years,” Pakistan's Finance Minister Miftah Ismail said late last month.
He said he had checked Pakistan’s remaining quota relating to the IMF’s special drawing rights (SDR), adding that it amounted to $2 billion.
“So, we have also requested the IMF to increase [the overall loan program] by $2 billion,” Ismail said.
If the country manages to clear the IMF review, Pakistan will get more than $900 million and unlock additional sources of external funding.
According to the local media, the decision to maintain fuel prices will put extra financial burden on the state. A report in Dawn newspaper said on Sunday the government would pay Rs40 billion to oil companies in the next two weeks to offset the growing price differential claims (PDCs).
Soaring fuel prices in Pakistan have also contributed to growing inflation. Former prime minister Imran Khan and his government had faced backlash over rising fuel prices before being driven out of power in a no-confidence vote.
The situation has not improved much as Pakistan’s statistics bureau said on Sunday the country’s CPI inflation rose to a two-year high of 13.37 percent in April compared to the same month last year.
Annual inflation accelerated to 12.7 percent in March, marking a 1.61 percent monthly rise in April.