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Petro-politics: Making sense of PM Imran’s ‘gift’ to the people

Petro-politics: Making sense of PM Imran’s ‘gift’ to the people



Petro-politics: Making sense of PM Imran's 'gift' to the people

The relief package marks a clear shift from the fiscal reforms agenda, which may not only irk the IMF but also hurt the economy.

Prime Minister Imran Khan caught almost everyone by surprise on Monday. Amid a global crisis in the form of the Russian invasion of Ukraine that sent global markets tumbling and a political storm brewing at home, the premier announced a major cut of Rs10 in the prices of petroleum products — the single largest contributor to the country’s import bill.

The move, which left citizens stunned and economists scratching their heads, was not just limited to subsidising petroleum products.

No, the prime minister went ahead and slashed energy prices, announced tax exemptions for IT companies and freelancers associated with the sector, exemptions from capital gains tax for IT startups, skills-based internships for graduates and an increase in the stipend disbursed under the Ehsaas programme from Rs12,000 to Rs14,000. Moreover, the cut in energy and fuel prices would be sustained for the next three to four months till the next budget, he promised.

Needless to say, the move raised many an eyebrow — and for good measure too.

Where would the government get the fiscal space to cover the expenditures, pundits questioned. Had it not increased petrol prices by Rs12 just a couple of weeks ago, saying it could not afford to offer subsidies? Are these measures sustainable? What about Pakistan’s commitments to the IMF? More importantly, how would the move impact Pakistan’s economy in the long term?

Let’s try to address these questions one at a time.

A Populist move. Period.

The move, though unexpected, is not a new trick in Pakistan’s political landscape, where almost every government has attempted to check petrol prices as a shortcut to wooing the electorate every time it found itself in trouble.

In this case, however, it is all the more difficult to see economic sense in the move as the government had raised petrol prices by Rs12 just a couple of weeks ago, when the benchmark crude oil was trading at around $95 per barrel. Nothing has changed since, except that the same commodity is being traded today at $110 per barrel.

The only logical explanation one can hence arrive at is this: that the announcement is a purely populist move, designed to buy the government some political mileage as opposition parties up the ante of an impending no-confidence vote and embark on long marches.

Perhaps the biggest giveaway in this case is the timing of the move — the pressure being built up by the opposition — and perhaps the government’s own allies — combined with an increasingly restless electorate seem to have forced the government to take this route.

The saddest part is that the very people, in whose name these actions are being taken, will see little to no benefit of the reduced prices, except that they may pay slightly lower amounts for getting their vehicles’ tanks filled. The cut will not inflict any substantial dent to inflation in the medium to long term.

Petroleum and energy prices, though important, are just one contributor to inflation in Pakistan. There are many other factors, such as governance or lack thereof, supply chain issues and hoarding, which have broken the backs of the most vulnerable for the past several years.

Moreover, once the prices of commodities go up, they are hardly ever seen to drop with a cut in petrol prices — at least not by any significant measure. For example, how many times have you seen a major cut in bus fares or product prices, even when the prices of petroleum products have been decreased? In fact, rarely is the benefit of a decrease in commodity prices passed on to the end consumer.

What the public will undoubtedly feel, however, is the pinch of inflationary pressures on commodity prices as a result of the fiscal deficit created by these populist measures. The government’s own estimates to finance this cut seem to ignore the rising trend of crude oil prices and their impact over the next three to four months. Freezing the prices at the current level till the next budget at a time when global oil prices are on an exceptional surge will leave an unbearable dent on the fiscal deficit.

The IMF conundrum

While the cut in petrol and energy prices were immediately implemented, the other measures announced by the prime minister in his address may take more time or may not even see the light of day until after the next budget. The process of designing and implementing these reforms — other than Ehsaas transfers — may take another two to three months, when it is time for the next budget. The announcement, however, will be enough to create some goodwill on its face value and buy the government some time.

And while it may yet be able to finance the cut in petrol prices — estimated at approximately Rs60 billion for the next four months — it would be hard put to both find the resources to implement the other measures and also explain its position to the International Monetary Fund (IMF), which finally released the sixth $1 billion tranche under its Extended Fund Facility after months of deliberations and only after Pakistan agreed to some very tough conditions, including the mini-budget.

While there are reports that the government is hoping to finance this Rs250-300 billion package from cuts in expenditure, and not by borrowing, one is hard-pressed to understand why these possible avenues were not utilised when the mini-budget was presented. What has changed that these avenues are suddenly now available?

If indeed the government does push on for the implementation of all the measures announced by the premier, it would not only be reneging on its commitments to the IMF, specifically in relation to fiscal reforms and pricing in the energy sector, but also jeopardising the seventh review by the Fund.

Not only will this hurt the government’s credibility, any form of derailment from the IMF programme will have an adverse effect on the exchange rate as well as the foreign exchange reserves, further elevating the inflationary pressure. This in turn can have wide ranging medium to long term consequences for the economy. The market is already exhibiting fears around this scenario.

Moreover, if the government does go ahead with the measures, it will also hurt its standing with other development partners such as the Asian Development Bank and the World Bank, who may stop their support in light of the country’s reversal on its reforms agenda. We had, in fact, seen a glimpse of this last year as the IMF was conducting the sixth review, when all other development partners were waiting for it to finish before extending support.

What is most unfortunate in this whole scenario is that despite the months of pain and suffering, taking tough decisions that caused the economy to contract even before Covid-19 struck and introducing a tough mini-budget, Pakistan would not be able to complete its reforms agenda simply because politics trumped basic economic sense.


Bilawal toes father Zardari’s line of political ‘unity’ ahead of polls




  • PPP chief Bilawal calls for burying politics of hatred, division.
  • Says wants to introduce new style of politics to end rivalries.
  • Zardari not afraid of “forces”, wants son Bilawal to become PM.

Following reports of differences between the top Pakistan Peoples Party (PPP) leaders, party chairman Bilawal-Bhutto Zardari has called for “burying” politics of hatred and division in line with the vision of his father Asif Ali Zardari’s reconciliatory politics.

“We have to do politics wherein we should think about unity and not of division. The PPP wants to start a new kind of politics in the country,” Bilawal said while addressing a public rally held to mark the PPP’s 56th foundation day in Quetta.

Bilawal said his party wanted to promote a style of politics under which there is no rival party of the PPP.

“PPP is fighting against inflation and poverty due to which people are suffering. The old style of politics is based on hatred, division, and revenge. The country’s youth needs to bury such politics,” the PPP chief added.

The PPP chief apparently lowered his rhetoric against his rivals in his first public interaction since his father Asif Ali Zardari’s interview wherein the top PPP leader termed his son “inexperienced” while expressing displeasure over his tirade against the elder politicians.

The interview broadcast on Geo News last week triggered speculations that there were cracks among the top PPP leadership.

However, the party quickly rejected the rumours, and Bakhtawar Bhutto-Zardari, the daughter of PPP Co-chairman Zardari, put to rest the speculation asking people to not pay heed to the headlines

She also shared an image with her family — including Zardari, Bilawal, and aunt Faryal Talpur. All of them seemed in a happy mood.

In the same gathering, Bilawal also fired a broadside at his political rivals saying that the Pakistan Muslim League-Nawaz (PML-N) is now known as the “mehangai [inflation] league” in the country.

“People know that they are showbaz [showmen] of politics,” the PPP chief added.

Bilawal said Imran Khan-led Pakistan Tehreek-e-Insaf (PTI) and the PML-N wanted to roll back the provincial autonomy granted under the 18th Amendment.

“They want to occupy the resources of the provinces..PPP will not let this conspiracy to succeed.”

Jiyala next PM’

Bilawal also announced giving a surprise to the entire in the February 8, 2024 general elections saying the jiyala [PPP worker] will become the country’s new prime minister.

Addressing the gathering, Zardari called for the support of his son to make him the country’s youngest prime minister.

“We have to teach Bilawal what we know […] we have to train him to make him a leader of the youth.”

The former president also said that some forces are always at play to pull the legs of a leader who wants to take the country forward.

“We are not afraid of such forces. We trust our people.”

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COAS Gen Asim Munir meets Kuwaiti crown prince




  • PM Anwaar-ul-Haq Kakar to meet Kuwaiti crown prince today. 
  • Both army chief and PM are in Kuwait on official visit. 
  • PM Office says multiple MoUs expected to be signed during visit. 

Army chief General Asim Munir on Tuesday met Kuwait’s Crown Prince Sheikh Mishal Al-Ahmed Al-Jaber Al-Sabah as part of his official visit to the gulf country, reported Kuwait News Agency (KUNA).

The meeting was also attended by Caretaker Law Minister Ahmed Irfan Aslam, Pakistan Ambassador to Kuwait Malik Mohammad Farooq and other members of the delegation.

Meanwhile, PM Kakar has also arrived in Kuwait City after concluding the UAE visit and is expected to meet the crown prince today, the PM Office said on Wednesday.

The premier will also meet his Kuwaiti counterpart Sheikh Ahmed Al-Nawaf Al-Ahmad Al-Sabah.

The PM office said that a number of memorandum of understanding (MoUs) will be signed for mutual cooperation in various sectors including manpower, information technology, minerals and mining, food security, energy and defence.

In UAE, Pakistan signed several MoUs worth multi-billion dollars in a range of areas on Monday to boost economic and strategic cooperation between the two countries, PM Kakar said.

The prime minister said with the signing of the MoUs, the bilateral economic and strategic relations had entered into a new era of bilateral cooperation.

Congratulating the people of Pakistan and the UAE, he said the foundation of friendship with Pakistan which was laid by Sheikh Zayed bin Sultan Al Nahyan in the 1970s, had been taken forward by his son Sheikh Mohamed bin Zayed Al Nahyan to a new era.

PM Kakar expressed the hope that the MoUs that were signed by the two countries would turn into tangible projects very soon.

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Imran Khan’s aide kickstarts PTI funding campaign in Europe




LONDON: Pakistan Tehreek-e-Insaf (PTI) leader Zulfi Bukhari has kickstarted a mass mobilisation and fundraising campaign for the party in the United Kingdom and Europe.

Addressing a workers’ convention in High Wycombe in London along with Sahibzada Jahangir, one of the founders of PTI, Zulfi said that the mass mobilisation and fundraising has been started for the elections scheduled for February next year.

“We will take part in elections at any cost. We need funds and effort from the overseas regions. The party needs funds for its legal challenges as well for the election campaign,” he said.

Zulfi said the entire leadership is prepared for the elections and will not be deterred by the arrest threats.

The former cabinet member said he will be going to Pakistan himself as soon as the party leadership directs him, adding that he was prepared to go to jail.

However, it is unlikely that Zulfi will be travelling to Pakistan anytime soon as the caretaker govt has requested Interpol for his arrest. He was in Dubai when the Interpol request was made, he left UAE and since then has not travelled outside London.

Zulfi said he will be personally visiting cities in the United Kingdom and Europe to raise funds.

The PTI leader revealed that the campaign in the UK is scheduled to start shortly and arrangements are in place. He said the PTI Core Committee was meeting daily to discuss affairs of the party to formulate strategies on a daily basis.

Zulfi Bukhari has so far stayed away from PTI UK events but his decision to take part in mobilisation suggests he has been asked by the leadership in Pakistan to engage with the local chapter.

Two weeks ago, he told an audience at the University of London that making Usman Buzdar Punjab’s chief minister was a mistake but Imran Khan did the right thing by not sacking him.

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