The government has decided to take the plunge and announce tough economic decisions despite the political cost. In order to placate the IMF and receive crucial funds for the faltering economy, the government announced a hefty Rs30 per litre hike in petroleum prices – the highest ever in one go.
The government claims the measures were necessary for fiscal consolidation. The results were seen within hours as the stock market surged and the rupee appreciated against the dollar. The downside was a massive hike in prices as flour rates increased at utilities stores and transporters jacked up fares.
The removal of fuel and power subsidies was a precondition for the revival of the stalled programme. Next is a massive hike in electricity rates and the privatization of loss-making power distribution companies. The government and PML-N have blamed each other for the situation and the masses will have to face the brunt of the price hike.
Finance Minister Miftah Ismail conceded that the hike in petrol hike would lead to inflation but the other alternative was to let the exchange rate depreciate. Eventually, the government took a considered decision to increase fuel prices. This brings it closer to the revival of the loan programme and Pakistan could receive further funding from multilateral institutions and friendly countries.
Shehbaz Sharif’s government was reluctant on taking the decision due to political backlash. It needs to be seen whether the decision will have an overbearing effect on the party. Will the other allied parties also take the burden? The government has perhaps regained confidence in taking unpopular decisions to tackle the crisis. If there is any positive development, the government will certainly take credit for it.
The government has also hurriedly passed electoral reforms which scraps using EVMs and the right of overseas Pakistanis has been withdrawn. All eyes are on whether the government will continue in power or calls for fresh elections. Even though the PML-N is split on holding polls and Imran Khan’s six-day ultimatum is looming, it seems the government will have to take its next big step.