ISLAMABAD: The Economic Coordination Committee (ECC) of the Pakistani cabinet on Thursday approved a technical supplementary grant (TSG) of Rs100 billion ($358 million) for the Prime Minister’s Austerity Fund, the information ministry said, amid an ongoing crisis in the Middle East.
The statement follows Pakistan’s announcement this month of austerity measures to conserve fuel as the United States (US) and Israeli strikes on Iran and Tehran’s counterattacks in the region drove up global energy prices.
Pakistan’s measures included introducing a four-day work week, slashing fuel quota for government vehicles, shifting classes of higher education institutions online, closing schools and establishing an austerity fund.
The information ministry said PM Shehbaz Sharif had directed the mobilization of Public Sector Development Programme (PSDP) resources to meet price differential requirements on petroleum products to cushion consumers from price volatility.
“The proposed allocation is being met through rationalization and surrender of PSDP funds by various ministries and divisions,” the ministry said, citing the ECC.
“The reallocation exercise has been undertaken to minimize disruption to priority and well-performing projects while creating the required fiscal space.”
Earlier this week, Pakistan’s government issued a tranche of Rs27 billion [$97 million] for the Oil and Gas Regulatory Authority (OGRA) to settle price differential claims arising from Islamabad’s decision to shield consumers from the impact of rising oil prices due to the Middle East conflict, the Finance Division said.
Pakistan increased petrol and diesel prices by Rs55 ($0.20) per liter, following a surge in global oil prices driven by the ongoing conflict, which has disrupted energy supplies through the Strait of Hormuz.
“OGRA has been provided the first tranche amounting to Rs27 billion, from the Prime Minister’s Austerity Fund, to settle the Price Differential Claims arising from the Government’s decision to shield the consumers from the impact of rising oil prices in the international market,” the Finance Division said on Wednesday.
The earlier hike in fuel prices this month by Pakistan pushed petrol prices above Rs320 ($1.14) and diesel close to Rs336 ($1.20) per liter. The move added to inflationary pressures by raising transport, food and retail costs during the peak Eid Al-Fitr season.
Pakistan’s inflation has eased to around 6–7 percent in recent months after peaking at 38 percent in 2023, but fuel costs continue to drive broader price increases across the economy.
Financial analysts have warned that if the war in the Middle East continues for a longer period of time, it could negatively impact Pakistan’s balance of payments, considering energy imports will further increase and the country’s exports could be adversely affected.
