ISLAMABAD: A long-awaited loan agreement between Pakistan and the International Monetary Fund (IMF) will be signed once a few remaining points, including a proposed fuel pricing scheme, are settled, an IMF official said on Friday. 

Pakistan and the IMF have been negotiating since early February on an agreement that would release $1.1 billion to the cash-strapped, nuclear-armed country of 220 million people. 

The latest issue is a plan, announced by Prime Minister Shehbaz Sharif last week, to charge affluent consumers more for fuel, with the money raised used to subsidise prices for the poor, who have been hit hard by inflation. In February it was running at its highest in 50 years. 

The plan involves a difference of around 100 rupees (35 US cents) a liter between the prices paid by the rich and poor, according to the petroleum ministry. 

Petroleum Minister Musadik Malik told Reuters on Friday that his ministry was working out details. It was not a subsidy but a relief program, he said. 

“People with larger cars will pay more than people with smaller cars. Smaller cars are more fuel efficient, so people will move toward more fuel-efficient cars,” Malik said. 

IMF needs explanation 

But the IMF’s resident representative in Pakistan, Esther Perez Ruiz, said the government had not consulted the fund about the scheme. 

Ruiz, in a message to Reuters, confirmed a media report that a staff-level agreement would be signed once a few remaining points, including the fuel scheme, were settled. 

She has said that the IMF would ask the government for more details, including how it would be implemented and what protections would be put in place to prevent abuse. 

The minister said the scheme wouldn’t cost the government anything extra. 

“We can explain all this to the IMF when they ask,” he said, adding that the lender was in touch with the finance ministry not his. 

The finance ministry did not immediately respond to a request for a comment. 

With $4.6 billion in foreign exchange reserves held by Pakistan’s central bank in the week ending Match 17, enough to cover only about four weeks of necessary imports, Pakistan is desperate for the IMF agreement to disperse a $1.1 billion tranche from a $6.5 billion bailout agreed in 2019. 

Islamabad has implemented several measures, including devaluing the rupee, lifting subsidies and raising energy prices, as preconditions for the agreement, which the finance minister said this month was “very close.”