(Bloomberg) -- Pakistan’s government is planning to raise fuel prices for wealthier motorists that will fund a direct petrol subsidy for lower income groups while it continues to negotiate with the International Monetary Fund to revive a $6.5 billion bailout.
Consumers using small vehicles including motorcycles and rickshaws will be given a subsidy of 100 rupees a liter, Petroleum Minister Musadik Malik said in a news briefing on Monday. The government earlier said the subsidy would be set at as much as 50 rupees a liter, signaling officials are trying to avert widespread anger as living costs rise.
“We will make petrol costlier for the rich and cheaper for the poor,” Malik said, adding that the plan will be implemented in six weeks. “The money we will be taking from the rich will be handed to the poor.”
The government did not give details on how the Washington-based lender will assess the move. A fuel subsidy announcement in March last year by former premier Imran Khan had stalled the loan program but this time around the bailout is crucial for avoiding a default.
Crisis-hit Pakistan has been tackling Asia’s second fastest inflation and severe supply shortages while contending with foreign exchange reserves at less than a month of imports. To secure the bailout, the authorities have raised taxes, hiked energy prices and increased interest rates to a 25-year high to tamp down prices.
The measure on subsidies will help protect the poor and vulnerable — a key prescription by the multilateral lender, said Ankur Shukla, an economist at Bloomberg Economics in Mumbai. The new subsidy program “should not be a distraction” for the IMF. The lender is more concerned about getting the assurances from the friendly countries for now, he added.
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