With fast depleting foreign exchange reserves, Pakistan’s coalition government led by Prime Minister Shehbaz Sharif has this week finally withdrawn fuel subsidies, resulting in an increase in fuel prices up to PKR 30. And, the government has hinted that more such painful measures are in line, as the country gears up to avoid a fate like Sri Lanka.

Standing on shaky political ground amid challenges posed by former prime minister Imran Khan, the Shehbaz Sharif government knew from day one that they had little time to act, and the prime minister had hinted at these measures in his inaugural speech in the parliament.

However, the government later grew hesitant as it didn’t want to burn its political capital, especially amid uncertainty over the possibility of early elections. The final push came this week, when the International Monetary Fund (IMF), reportedly refused to revive the IMF deal until the government withdrew its fuel subsidy.

“We took the decision because it was inevitable to avoid default,” Sharif said in his first address to the nation on Friday, accusing the previous government, which had announced fuel and power subsidies just before its departure, of ignoring national interest.

Furthermore, Musadiq Malik, minister of state for petroleum, on Saturday also added that hike in electricity tariff hike was also on the card, adjusting the recently increased fuel prices. Reports suggested the Pakistan military, concerned over the deteriorating economic situation, also pushed the government.

Imran Khan’s decision to call off its strike—which many say came after the military pressured Khan—also boosted the government’s confidence. Additionally, in order to help the poor people, the government has also announced a separate package worth around $140 million in the form of subsidies.

(SAM)

Currently, the government’s foreign exchange reserves are at around $10 billion, hardly enough to cover two months’ imports. With these recent measures, the efforts are on to get the IMF program running, which would possibly see the IMF releasing $1 billion in the coming week.

On Friday, when asked about the possibility of importing cheap fuel and wheat from Russia, Pakistan's Foreign Office didn’t rule out the possibility. Khan has constantly accused the Sharif government of not pursuing talks with Russia for fuel.

“Our policy is clear, you know in terms of expanding economic and trade relations, we have an open policy, driven by national interest. Wherever we see there is a national benefit, we pursue those options and avenues,” Asim Iftikhar, spokesperson of the Foreign Office, was quoted as saying by The Express Tribune.

Meanwhile, Saudi Arabia has also assured the government that it will extend its $3 billion deposit in the State Bank of Pakistan in the coming weeks to support Islamabad.