Pakistan wants to satisfy the IMF’s concerns before implementing its new gasoline subsidy scheme, despite its massive financial problems and record-high inflation.
Minister of State for Petroleum Musadik Malik told Bloomberg TV regarding the country’s energy transformation and debt issue that the lender was concerned about the government’s intention to boost fuel costs for wealthier vehicles to subsidise lower-income citizens.
“We want to make sure that if we move forward, we take care of their (IMF) concerns and make sure that they completely understand what we are trying to do and why,” he added.
We originally thought it was a much simpler notion because earlier negotiating with the IMF and the bank was also helping the negotiations we put together a plan in which we charged a higher petrol price to the rich and a lower price to the poor. The minister emphasised that we were subsidising the poor and taxing the rich more.
The minister recognised that the IMF had certain doubts and that the government was open to meeting with the lender to ensure its satisfaction with the gasoline plan.
Circular Debt Danger
The minister said the planned gasoline subsidy will charge the rich and industries a little extra and subsidise the poor, eliminating circular debt.
“But the regulator would not let us do that, so we very successfully got rid of that circular debt/debt that could not be financed/charged to end consumers. But that only took care of the flow and didn’t contribute to circular debt anymore,” he continued.
However, with the stock we had, we assumed that many of these companies owed each other a lot of money because most of the sector is dominated by state-owned corporations and some had account payables and others had account receivables. “So, our thinking was that we would actually do the equity swaps or issue dividends in payoff so that the circular debt or the debt that different companies owe is taken care of,” he said. “We’re coming up with the mechanism of issuing dividends and using those dividends to pay off the debts and clean the books”.
We’ll take our time. We stopped accumulating debt, our main issue. He said that circular debt is currently nil.
We’re confident we can fix our stock in two months. We also wish to confirm our Petroleum Scheme. “We saw that the IMF had some queries and concerns, so we want to make sure now that if we move forward, we take care of their concerns and make sure they completely understand what we’re trying to do and why,” he added.
“I think elections will take place towards the end of this year,” the minister stated of national elections.
As you indicated, inflation is significant, therefore we had to make many tough decisions. “It’s poor with high inflation,” he remarked.
When we took over, its finances were precarious. We’re pushing the edge and trying to reform the economy. He added that we’re optimistic we’ll bring relief.
We borrowed a lot to create infrastructure like the government should. When asked about Pakistani markets’ growth prospects, he responded, “And I think we were able to build an enormous infrastructure between 2013 and 2018.
“I think we need a new port,” he added. Most critically, we have energy and road infrastructure.
When his party took control in 2013, Malik stated the administration eliminated load-shedding, which boosted economic growth. We supplied industrial and commercial energy. New enterprises created jobs. “Now we’re trying to do the same,” he said.
With some funding and infrastructure, the minister hoped the country could accommodate startups. “With a little bit of additional financing, we’re hoping to do the proliferation of new businesses and consequently job creation and economic growth,” he continued.