Govt mulling to jack up oil prices ahead of IMF talks

ISLAMABAD   –   The federal government is seriously contemplating to increase the oil prices ahead of talks with the International Monetary Fund (IMF) to revive the loan programme.

The government is likely to eliminate the subsidy on oil and electricity in a gradual manner, a senior official of the Ministry of Finance informed The Nation on Saturday.

He further said that the government would consider the possible hike in petroleum products prices today after consultation with Prime Minister Shehbaz Sharif and Finance Minister Miftah Ismail.

The IMF has linked the revival of talks for next tranche with the increase in oil and electricity prices, as the talks between the two sides would start from May 18 in Doha, Qatar.

Prices of petroleum products and electricity are unchanged since March this year when former prime minister Imran Khan had announced to freeze oil prices till June 2022 despite massive increase in oil prices in international market. The decision of keeping oil prices unchanged has created problems for the economic managers of the country to provide massive subsidy on the petroleum products every month. The finance minister has criticised the previous government for keeping oil prices unchanged despite increase in international market.

The Oil and Gas Regulatory Authority (OGRA) has prepared a summary for increasing the oil prices for the second half (from May 16) of the current month. According to reports, the government is currently giving around Rs30 per litre subsidy on petrol and above Rs45 per litre on diesel. Similarly, the government is giving Rs73.04 per litre subsidy on diesel and Rs43.16 on kerosene. The OGRA had calculated subsidy to increase to Rs47 per litre on petrol and Rs86 on high-speed diesel (HSD) if the landed cost is passed on to consumers. Meanwhile, the price of kerosene and light diesel oil has been calculated to go up by Rs52 and Rs69 per litre without taxes. However, it depends on the government whether it would eliminate the subsidy in one go or in different phases.

“The government will likely to increase the petrol and diesel prices from Sunday (today). However, it will gradually withdraw the subsidy keeping in view the increase in political temperature and higher inflation rate,” said another official.

The budget deficit is widening with the passage of every month mainly due to the massive subsidy on electricity and oil prices, he added.

On the other hand, talks between Pakistan and IMF would start from May 18 in Doha, Qatar. The IMF mission will discuss with the authorities, policies to further the Extended Fund Facility’s 7th review. The talks are expected to continue for one week. Pakistan would receive around one billion dollars from the Fund if the talks remain successful. In last month, the IMF had agreed to increase the size of its $6 billion loan programme by $2 billion and extend it for another year to prop up Pakistan’s balance of payments position and foreign exchange reserves. Pakistan had asked the IMF to enhance its bailout package from the remaining $3 billion to $5 billion.

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