Pakistan's new Prime Minister Shehbaz Sharif, is in internal discussions about phasing out fuel and electricity subsidies, which have drained public finances amid a shaky economy, officials said.
Former Prime Minister Imran Khan, who was ousted in a confidence vote this week, announced cuts in gas and electricity prices in February to regain popular support despite rising world prices.
But this relief effort, worth 373 billion Pakistani rupees ($2.06 billion), has exhausted public finances unsustainably, the chief bureaucrat of the Ministry of Finance said.
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It has also jeopardized an ongoing International Monetary Fund bailout program. "The bailout package will increase the budget deficit, which we cannot afford at the moment, as per Reuters reporting.
"Either it must be reversed, or it will be necessary to offset cuts in other spending to ensure the primary balance agreed with the IMF is met," says finance Secretary Hamed Yaqoob Sheikh. The primary budget balance does not include debt payments.
The budget deficit could reach 10 percent of gross domestic product, according to Sharif's chief economic adviser, Miftah Ismail, who is widely expected to become finance minister. Sharif spoke to his finance team about the grants on Thursday.
"We discussed this before (with the previous government) and we are discussing it again with the new government," a finance minister told Reuters on condition of anonymity.
Officials are proposing to stagger the withdrawal of subsidies over two to three months to mitigate its impact, he said, adding that the decision now rests with the new political leadership.
The Petroleum and Gas Regulatory Agency (OGRA) released a summary Thursday focusing on a rise in oil prices from April 15.
The regulator has recommended an increase of Rs 83 rupees liters in the price of petrol including 30 rupees levy and 17% GST.
The agency has also proposed an increase of Rs.119 per liters in the price of high-speed diesel given the recent rise in global oil prices.
Currently Petrol is being sold on 149.87 rupees per liter meanwhile the HSD high speed diesel is being sold at 144.15 rupees per litre.
