ISLAMABAD: As Pakistan increased petrol prices by Rs35 per liter, Defense Minister Khawaja Muhammad Asif said on Sunday that the country had to agree to “very tough” conditions imposed by the International Monetary Fund (IMF) out of “compulsion” to address its economic woes.
The IMF’s mission is scheduled to visit Pakistan on January 31 to discuss the resumption of its $7 billion loan program, as Islamabad desperately seeks another loan tranche to shore up its foreign exchange reserves. Pakistan's forex reserves have declined to a staggering $3.6 billion, not even enough to cover a month of imports.
Earlier today, Finance Minister Ishaq Dar announced jacking up prices of petroleum products in the country by as much as Rs35 per liter. The minister said the decision was taken due to the Pakistani rupee's recent devaluation and up to an 11 percent increase in global fuel prices.
The hike in prices of petroleum products is part of the IMF's conditionalities to revive the stalled loan program, which requires Pakistan to do away with expensive energy subsidies. The price hike is expected to further increase decades-high inflation in the South Asian country.
The global lender also wants Pakistan to reestablish a market-based mechanism to determine the value of the Pakistani rupee, which fell to a record low of 269.60 against the dollar in the open market this week. Such a mechanism is a key prior action for the country to receive IMF support.
“The IMF program, which we had to re-enter because of the [current] circumstances and out of compulsion, has set very strict and tough conditions for Pakistan,” Asif said on Sunday, speaking to reporters.
He added the government would undertake efforts to ensure the common man would not have to bear the economic burden of IMF’s conditions.
“We will try that only those belonging to the [upper] socioeconomic class will have to bear the economic burden of this crisis,” he said.
Answering a question related to the acute dearth of forex reserves in the country and the ensuing depreciation of the rupee against the dollar, the defense minister said people who have a foreign currency account in the country would still be able to withdraw “some” of their money in dollars.
“If someone here has a dollar account and wants to withdraw money from their banks, they can do so but in small amounts. For instance, if someone wants to take out money to pay for their children’s school fees, they can do so,” he clarified.
Asif also said the country’s imports, which had to be halted due to the dwindling reserves, were “gradually being relaxed.”
“Our exports are gradually being relaxed, so we will hopefully recover from the economic [turmoil] soon,” he said. “Slowly and gradually, things are being streamlined.”
Pakistan secured a $6 billion IMF bailout in 2019, which was topped up with another $1 billion last year. However, the lender then stalled disbursements in November due to Pakistan’s failure to make more progress on fiscal consolidation and economic reforms.