FINANCE Minister Miftah Ismail said on Monday that he would convey to the International Monetary Fund (IMF) that fuel and energy subsidies — which were introduced by the previous PTI government — could not be reversed as the “nation cannot endure it”.
Ahead of joining talks with the IMF for the resumption of a $6 billion loan programme that has been stalled since early April, Miftah told media persons in Karachi that Prime Minister Shehbaz Sharif and PML-N supremo Nawaz Sharif had ruled out the possibility of ending the subsidies.
No doubt, the decision to subsidize fuel and electricity was taken by former Prime Minister Imran Khan under political pressure and there is a viewpoint that these should be reversed in view of the economic and financial difficulties of the country.
However, it is also a fact that free fall of rupee and frequent upward adjustments in the prices of POL products and electricity/gas tariffs were the main factors behind the sky-rocketing inflation and the resultant woes of the people.
According to the Finance Minister the previous government agreed with the IMF to increase the price of diesel by Rs.150 a litre and petrol by Rs.100 per litre, implementation of which would surely play havoc with the house-hold budgets.
The Government has, therefore, wisely decided not to burden the people further but it is yet to be seen what the Government has in store to bring the economy back on track.
If subsidies cannot be reversed for fear of backlash from the public opinion, something might have to be done to compensate for the financial losses so incurred by the Government.
The Government has already restricted import of luxury goods which would help save precious foreign exchange but reports suggest the IMF is also opposed to this move as this means placing restrictions on imports from donors/influential countries.
There are, however, many segments of the society that are not paying their due taxes and revenue collection can be increased significantly by making them pay honestly.
The Finance Minister has also stated that he would seek a ‘break’ from the IMF (with regard to reversal of subsidies on fuel and electricity) adding that he would return from Doha with ‘good news’.
The Government is practically doing nothing to stop further devaluation of rupee in an apparent bid to appease the IMF but it is a million dollar question as to how the Government aims to satisfy the IMF with regard to subsidies.