• Monthly PDL increase of Rs 5 and 10 in diesel and petrol
• Without interference in exchange rate
• Imported backup coverage for 10 weeks
• Gradually stop of Ehsas nutrition program
ISLAMABAD: government made a commitment to the International Monetary Fund (IMF) to raise the oil development collection (PDL) on maximum of 50r per liter each on gasoline and diesel by January and April, respectively, in 2023.
In your letter of Intention (LoI) sent to the IMF for official approval of completion of 7th and 8th reviews of $7 billion Extended Financing Facility (EFF), Pakistan also made ironclad obligations to build foreign exchange reserves for a period of at least 10 weeks of import at the end of in current fiscal year from existing 5 weeks and up to use these reserves ever support exchange rate.
IMF Country Representatives Esther Perez Ruiz on Wednesday announced that the meeting of the Fund’s Executive Board for The combined seventh and eighth EFF reviews of Pakistan were scheduled for August 29th.
government It has also approved by the federal governmentof implementation plan of monthly PDL increase of 10 rupees/liter for gasoline and 5 rubles / liter for diesel on September 1, 2022, with subsequent increase of 5 rupees per month for both fuels until PDL reaches Rs 50. in January for petrol and april for diesel” from current rate of Rs 20 per liter PDL on gasoline and 10 rubles. on the other three products are high-speed diesel, kerosene and light diesel fuel.
Same way government will phase out Ehsas Ration Riyat program during the fiscal year and continue with Sasta Fuel Sasta Diesel (SFSD) for currently with clear sunset by June 2023.
Nonetheless regular BISP to be expanded with Ehsas Emergency Cash and unconditional cash transfer program worth 316 billion rupees. year to reach nine million families.
According to LoI, government would “remain seeks to provide cash and financial stability by maintaining market-certain exchange ratereduction of inflation to the target level and restoration of foreign exchange reserves”.
Above next pair of months, ministry of Finance will require about 150 billion rupees worth of fresh income measures to make up for some reversals in taxation and untargeted increases in Expenses.
schedule of actions in this is direction there will be a “permanent commitment market-certain exchange rate and external stability. government reported that external conditions had become unreliable in recent months, on in back of high uncertainty, large terms-of-trade shock, and constantly great current account deficit.
Read: Upstream IMF
Strong demand for foreign currency from external debt repayments and imports put pressure on an exchange rate that has depreciated on over 33% between the end of December 2021 and the end of July, while inventories fell to below 1.5 months of import.
“In this context, we remain committed market- a certain exchange rate, which served as an important buffer protecting economic activity and reserves during this long period. of increased uncertainty, while supporting smooth function of in market”, – the message says, adding that the State Bank of The intervention of Pakistan (SBP) will remain guided by market conditions and purpose of restoring reserve buffers to bring reserves up to more prudent level of at least 2.2 months of import coverage by the end of fiscal year 23, despite difficult external environment.
“Selling in the Forex market will not be used to prevent a depreciation trend in the rupee due to fundamental factors,” the report said. bank and ministry of There is finance made firm commitment.
Furthermore, government modernizes the Debt Management Office (DMO), which will responsible for development and implementation debt control strategy in line with World Bank and IMF. strategy combine disparate functions of debt recommendations. Following amendments to the Tax Liability and Limitation of Debt Act (2005), management approved in Let it be the year the finance department instructed the hiring of additional staff appropriate with responsibilities.
government is currently in process of parameter up front officemiddle and back offices of in new DMO will be completed by the end of November 2022. Migration of corresponding functions for DMO from other parts of government agencies were already was completed in March 2022 and its alignment with Another government departments, especially the Department of Economics, improved to ensure accurate compilation and reporting of debt related statistics.
government stated that Pakistan continues face complex economic and political environment bye successfully overcoming the Covid-19 pandemic, wars in Ukraine has created uncertainty through higher international commodity prices and unfavorable external financing conditions. It has already result in higher inflation, higher spreads and more current account deficit, at the same time government changed on April 11.
It was said by the previous government granted a four-month grace period package in February (including wide-ranging subsidies, fuel tax cuts, new tax incentives and tax amnesty), but added what current government “recognize(d) that these acts are not-in as well as of themselves contribute to a sustainable macroeconomic environment as well as also run against a little of Pakistan’s previous commitments under its IMF-supported program.”
Thus, in order to restore macroeconomic and external stability government completed and completed five previous actions, including revised budget Approval 2023, Memorandums of Understanding with provinces on provincial goals are consistent with 750 billion rupees cash excess target in in budget, complete reversal of February relief package including full elimination of general fuel subsidy and blanket Rs 5/kWh power subsidy in June and acquaintance of PEP on gasoline at 10 rubles / liter on diesel at 5 rubles / liter on July 1st and then double it on August 1, in addition to tightening of monetary policy up to 15 pcs.
Published in Dawn, August 18, 2022
