After months of deliberation, the International Monetary Fund (IMF) confirmed on Thursday that Pakistan has committed not to introduce a petrol subsidy. The statement comes as a surprise, as Minister of State for Petroleum Dr Musadik Malik said on Tuesday that Pakistan aims to address the IMF's concerns before implementing its new fuel subsidy plan.
The IMF spokesperson said that the Fund remains engaged with Pakistan on securing funding and policy assurances with the goal of reaching an agreement on the ninth review of the $6.7 billion loan agreed in 2019. "The IMF sees no indication that Pakistan wants to pause negotiations on disbursement from the current programme," the spokesperson said.
However, concerns have been raised that Pakistan is edging closer to a default as political unrest will delay an IMF bailout. Violent protests erupted in Pakistan on Tuesday with dozens injured across several cities and demonstrators attacking military buildings after former Prime Minister Imran Khan was arrested. The rupee slumped to a record low and slid over 2% to close at an all-time low of 290.22 a dollar on Wednesday, according to State Bank of Pakistan data. Dollar bonds due 2031 fell to the lowest since November on Thursday and were indicated at 33.10 cents on the dollar.
The IMF's confirmation of Pakistan's commitment not to introduce a petrol subsidy is a positive development, as it could help to pave the way for an IMF bailout. However, the political unrest in Pakistan is a major concern, and it is unclear how long it will take for the country to stabilize.
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