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Not consulted on petrol subsidy for low-income groups: IMF

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  • IMF seeks details on operation, cost, targeting, protections against fraud and abuse, and offsetting measures.
  • Govt, a day earlier, had announced subsidy help inflation-hit masses.
  • IMF says Islamabad has made “substantial progress” on policy commitments.

The International Monetary Fund (IMF) said that the Pakistani government did not consult the global lender on its petrol subsidy for low-income groups, reported Bloomberg on Tuesday.

Esther Perez, the IMF’s resident representative for Pakistan, told the publication that the lender was not consulted on the government’s plan to raise fuel prices for wealthier motorists to finance a subsidy for lower-income people.

“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,” said Perez.

‘This is not subsidy’

A day earlier, Minister of State for Petroleum Musadik Malik announced that the federal government in order to cushion the effect of high petrol prices on inflation-hit masses decided to subsidise petrol up to Rs100 for motorcyclists and owners of vehicles up to 800cc.

“Prime Minister Shehbaz Sharif has directed to provide subsidy on petrol to low-income people up to Rs100 per litre,” Malik told journalists in Lahore.

Earlier, it was decided to provide a subsidy of Rs50 per litre.

The minister said under a comprehensive strategy, subsidised petrol will be available to motorcyclists and owners of vehicles up to 800cc.

Malik further said owners of vehicles above 800cc would be charged full price.

He said the decision to provide fuel at subsidised rates will be implemented within six weeks, adding that the government will make petrol cheaper for the poor.

“The owners of big vehicles will pay more for petrol. The rich will pay Rs100 more for petrol while the poor will pay Rs100 less. 210 million people are poor in a population of 220 million, we stand with poor Pakistan.”

He said that the decision on the gas tariff has been implemented from January 1. “We have separate tariffs for the poor and the rich.”

Pakistan has made ‘substantial progress’: IMF

On the staff level agreement, the IMF said that Islamabad has made “substantial progress” in meeting the policy commitments required to unlock billions of dollars in loans.

“A staff-level agreement will follow once the few remaining points are closed,” said Perez told Bloomberg.

“Ensuring there is sufficient financing to support the authorities in the implementation of their policy agenda is the paramount priority.”

Last week, Finance Minister Ishaq Dar had said that the global lender wanted to see countries finalise commitments they have promised to help Pakistan shore up its funds before signing off on the bailout package. Pakistan needs to repay about $3 billion of debt by June, while $4 billion is expected to be rolled over.

Pakistan has taken tough measures including increasing taxes and energy prices, and allowing its currency to weaken to restart a $6.5 billion IMF loan package. The funds will offer some relief to a nation still reeling from last year’s devastating floods and help pull the economy out of a crisis ahead of elections this year.

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An increase in tax was made on restaurant card payments.

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After 15 years, the SRB reduced the service tax that 58 hotels and restaurants in Karachi could have charged on debit and credit card purchases to 15%. This action is a part of the Sindh budget, which was designed to make eating out less expensive for customers.

Prior to this, Sindh’s tax on credit and debit card purchases was lowered from 15% to 8%.

Officials from the SRB have further stated that the service was made available for input adjustment of restaurant tax payments. With this step, businesses will be able to efficiently handle their tax responsibilities and the tax process would be made simpler.

Only a few eateries have been given authority to remove the lower tax rate, even though this tax facility has been reversed.

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The KSE-100 Index rises following a sharp decline in the previous session.

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The government is considering filing a treason case under Article 6 against PTI founder Imran Khan, former president Arif Alvi, and former deputy speaker Qasim Suri. On Tuesday, the KSE-100 Index was up more than 1.3% during early trading, following a day of roughly a 2 percent loss due to growing political unrest and the potential banning of the party.

However, the benchmark index of the Pakistan Stock Exchange was trading at 79,074.63 by 11:49 a.m., having gained 535.45 points, or 0.68 percent, after reaching an intraday high of 79,578.04.

Market analysts said that political tensions were the primary cause of the KSE-100’s earlier Monday decline of 1578.71 points, or 1.97 percent.

They did point out, though, that a correction was a reasonable reaction to the protracted upswing that allowed the benchmark mark index to reach 81,839.86 on July 18.

As a result of interest rate cuts and the possibility of another IMF program, the Pakistan Stock Exchange has gained 22.97 percent so far this year. The cycle began on June 10 with a 1.5 percent decrease in borrowing costs.

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In interbank trade, the US dollar crushes the Pakistani rupee.

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During interbank trade on Tuesday, the US dollar’s value increased by 15 paisas, reaching Rs 278.45.

It is important to remember that Fitch Business Monitor International expressed concern about the possibility that Pakistan’s economic stability may be jeopardized by the ongoing political unrest.

The fragile situation of Pakistan’s economic recovery was emphasized by Fitch in its most recent Pakistan Country Risk Report, which also noted that economic activity has been impeded by urban protests.

(PTI),In spite of multiple successful judicial appeals, the founder of Pakistan Tehreek-e-Insaaf (PTI) is expected to stay behind bars, the article notes, underscoring the fragile political environment.

With no urgent plans for new elections, this scenario suggests that the coalition administration will remain in office for the next 18 months.

Fitch also described an eventuality in which the government could change and be replaced by a technocratic administration. This suggests that the government of Pakistan would carry out the reforms demanded by the IMF, contributing to the 3.2% GDP growth expected in 2024–2025.

The policy rate has stabilized above projections, while the research predicted it may reach 16 percent this fiscal year and 14 percent the following year.

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