According to a report published by the Bloomberg, the International Monetary Fund (IMF) was not consulted on the matter of the fuel subsidy by the federal government. The media reports state that the IMF has sought details of the scheme from the government.
In what appears to be a populist move in the name of providing relief to the masses, the government had announced a Rs50 fuel subsidy for motorcycles, rickshaws and cars up to 800cc before doubling down on it and increasing it to Rs100. The government intends to charge the rich more for petrol in order to provide relief to the poor.
Esther Perez Ruiz, IMF’s resident representative, while speaking to the Bloomberg said: “Fund staff are seeking greater details on the scheme in terms of its operation, cost, targeting, protections against fraud and abuse, and offsetting measures, and will carefully discuss these elements with the authorities.”
While speaking about the possibility of reaching an agreement with the federal government, she said that the government had shown willingness and was moving in the right direction but some steps were still needed to be taken before a final agreement could be reached.
Pakistan has been facing a severe economic crunch with the inflation rate surging to truly unprecedented levels. With the government announcing the fuel subsidy at a time where Pakistan’s circular debt is spiraling out of control and no relief from IMF or any other friendly nation is in sight, the economic default looks imminent.