Pakistan commits to IMF bailout deal without fuel subsidy scheme

Pakistan has informed the International Monetary Fund (IMF) that it will not be implementing a fuel subsidy programme during ongoing negotiations for a $1.1 billion bailout for the country.

The IMF has stated that it will continue to engage with the government on the loan, despite increasing political tensions.

Prime Minister had previously proposed a fuel subsidy scheme in March, which would charge higher rates to affluent consumers to subsidise prices for the poor who have been hit hard by inflation.

However, the government has now committed not to implement this programme in the current fiscal year or beyond. Instead, it will not introduce new tax exemptions and will allow a market-based exchange rate for the rupee currency.

The IMF has said that Pakistan needs significant additional financing to complete the long-delayed ninth review of its bailout package.

Obtaining commitments of significant additional financing is essential before the IMF approves the release of pending bailout funds that are crucial for Pakistan to resolve an acute balance of payments crisis.

According to Dawn, the State Bank of Pakistan’s reserves fell to $4.38 billon on Thursday, which is barely a month’s worth of imports. The IMF has emphasised that Pakistan faces stagflation, large financing needs, and has been affected by several shocks, including severe floods.