The Pakistani government surprised the world by raising the price of petroleum products by 30 PKR per litre, or one-fourth of their current price, opening the door for a staff-level deal with the International Monetary Fund (IMF) by June 12.
According to The Express Tribune, the unusual action will assist defuse landmines set by the government of former Prime Minister Imran Khan on the one hand, and save the country from approaching default on the other.
After Prime Minister Shehbaz Sharif gave him the go light in a party meeting, Finance Minister Miftah Ismail announced the decision in an unexpected news conference.
With the new rise, the new price of petrol will be 179.88 PKR a litre, the highest ever rate and a 20% increase over current pricing.
According to The Express Tribune, Ismail stated it was a “tough decision that will diminish political capital.”
“The government was giving 56 PKR per litre subsidy and I have only reduced the loss by 30 PKR per litre,” he said at the news conference.
The increased price of high-speed diesel will be 174.86 PKR per litre, an increase of 20.8 percent.
According to Ismail, the government provides a subsidy of Rs86 per litre, with the first batch’s subsidy amount lowered by only 30 PKR.
“The government cannot allow the country to fail, and it is willing to pay the political price to safeguard the state’s interests.”
“We had the alternative of protecting the government’s political interests or saving the country from default, and we chose to preserve the state’s interests,” he continued.
The government’s decision to raise prices at the expense of political capital shows that it may have had support from the establishment in order to stay in power.