The government decided on Friday to eliminate subsidies on oil and gas and to phase out the subsidy on electricity by June 2009 under a plan to stabilise the economy.
Announcing an economic package at a press conference, Finance Minister Naveed Qamar said it was aimed at bringing about macroeconomic stability, narrowing down the fiscal and current account deficits and minimising pressures on foreign exchange reserves.
The finance minister, who was accompanied by State Bank Governor Dr Shamshad Akhtar, said Pakistan would not seek any new assistance from IMF, but international financial institutions and donors could monitor implementation of the package.
“We are not going into an IMF programme,” he said, adding that the “home-grown” package had been worked out in consultation with different stakeholders, including the World Bank, IMF and ADB.
”I can safely announce today... we have eliminated the entire fuel subsidy and there is no additional subsidy today that is going out of the budget to subsidise fuel,” Mr Qamar added.
He said the subsidy on gas had also been withdrawn and the actual cost of gas would now be passed on to consumers.
He admitted that the passing on of subsidies to consumers would add to people’s hardship, but said the government had to stabilise macro-economic indicators which had deteriorated because of the policies of the previous government. He said the government was trying to be close to the fiscal deficit of around 4.7 per cent.
The finance minister said that various measures had been proposed to minimise government spending, but did not elaborate. However, he said the government was looking at PSDP allocations.
”We can only spend what we have in the kitty and suggest a drastic cut in the development sector,” he added.
Admitting that excessive borrowings from the SBP had led to inflation, Mr Qamar said the government had decided to launch non-bank borrowing schemes, including PIBs and commercial papers, in order to curb inflation.
-All fuel subsidies withdrawn
IMF might bail Pakistan out