Pak FM warns of default if fuel rebates not abolished

Pakistan will default if the government does not abolish the subsidies on petroleum products, Finance Minister Miftah Ismail has said, warning that the cashstrapped country’s economy could be in a similar position as that of Sri Lanka if tough decisions were not taken.

Ismail claimed that the government was still giving Rs 19 subsidy on petrol and Rs 53 subsidy on diesel, adding that Sri Lanka also gave subsidies to its public and it, eventually, defaulted. Finance Minister Ismail said the International Monetary Fund (IMF) has insisted on abolishing the subsidies on petroleum products. The finance minister said if the price of petrol and electricity is not increased, then the country will default.

“I have told the prime minister that we have to take tough decisions. The prime minister is unhappy with increasing the prices of petroleum products,” Miftah said.

Today, Sri Lanka is purchasing expensive oil and they do not have funds to buy medicines for their people, the finance minister said as he warned of a similar situation in Pakistan. In a bid to bring economic stability and revive the stalled multi-billion-dollar IMF programme, the government had increased the price of petrol by a Rs 60 per litre last month.

It was also expected that after the budget, some hurdles would be removed in the IMF programme’s revival. But the finance minister last week said the IMF “was still unhappy with the government over the budget” mainly because it did not implement the Personal Income Tax (PIT) measures suggested by it. Last week, Miftah said that there was no financial emergency in Pakistan after the government took steps to rectify the ongoing economic turmoil and increased the price of petrol.