After months of negotiations, the International Monetary Fund (IMF) confirmed on Thursday that Pakistani authorities have pledged not to introduce a petrol subsidy, Bloomberg reported.
“Pakistan authorities have committed not to introduce fuel cross-subsidy scheme in F23 [fiscal year 2022-23] and beyond,” an IMF spokesperson told the foreign publication.
On Tuesday, Minister of State for Petroleum Dr. Musadik Malik said Pakistan would address IMF concerns before implementing its new fuel subsidy plan, so the statement is surprising.
“The IMF had some reservations about the government’s plan to raise fuel prices for wealthier motorists to finance a subsidy for lower-income people,” he said in an interview on Bloomberg TV.
Malik said, “We thought it was a much simpler idea. We want to address their concerns and make sure they understand what we’re doing and why before moving forward.
Pakistan has pledged to the Fund not to introduce the subsidy, according to the Washington-based lender.
The spokesperson declined to comment on the arrest of former prime minister Imran Khan, but said the IMF is working with Pakistan to secure funding and policy assurances for the ninth review of the $6.7 billion loan agreed in 2019.
“The IMF sees no indication that Pakistan wants to pause negotiations on disbursement from the current programme,” the spokesperson said.
The arrest of the Pakistan Tehreek-e-Insaf chairman raised concerns that political unrest would delay an IMF bailout, pushing Pakistan closer to default.
Eng Tat Low, an emerging-market sovereign analyst at Columbia Threadneedle Investments in Singapore, said Pakistan may default without new funding.
“An IMF deal is also becoming less likely. “Their heavy debt amortisation against precarious reserves suggests default is imminent,” he added.
After Khan was arrested, Pakistani protesters attacked military buildings and injured dozens. The police also arrested party leaders and thousands of workers.
According to State Bank of Pakistan data, the rupee fell 2% to 290.22 a dollar on Wednesday. On Thursday, 2031 dollar bonds fell to 33.10 cents on the dollar, the lowest since November.