A new fuel pricing scheme needs to be agreed before IMF deal

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A new fuel pricing scheme needs to be agreed before IMF deal

A long-awaited loan agreement will be signed with the International Monetary Fund (IMF) when a few outstanding issues, such as the proposed fuel pricing plan, are resolved, an IMF official said on Friday.

Since the beginning of February, talks have been going on to reach a deal that would allow the cash-strapped, nuclear-armed nation of 220 million people to receive $1.1 billion.

The most recent issue is a proposal to increase fuel costs for wealthy users, which was made public by Prime Minister Shehbaz Sharif last week. The money raised would be used to reduce prices for the poor, who have been severely impacted by inflation, which in February reached its highest level in 50 years.

The petroleum ministry reports that the scheme anticipates a pricing gap between the wealthy and the poor of about Rs. 100 per liter.

Musadik Malik, the minister in charge of petroleum, told Reuters on Thursday that his department had been given six weeks to develop the pricing strategy. According to him, it would not be a subsidy but rather a program of assistance for the poor.

The IMF’s resident representative in Pakistan, Esther Perez Ruiz, asserted that the government had not consulted the fund regarding the fuel pricing plan.

Ruiz confirmed in a message to Reuters that a staff-level agreement will be signed when a few outstanding issues, including the fuel scheme, were resolved.

A request for comment was not immediately met by the finance or petroleum ministries.

Pakistan is appealing to the IMF to release a $1.1 billion tranche from a $6.5 billion bailout promised in 2019 because it barely has enough foreign reserves to pay around four weeks’ worth of imports.

According to Ruiz, the fund will request more information from the government regarding the fuel proposal, including information on how it will be put into practice and what safeguards will be put in place to prevent abuse.

As a requirement for the deal, which the finance minister claimed this month was “very close,” Islamabad has put in place several fiscal measures, including depreciating the rupee, eliminating subsidies, and boosting energy costs.

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