The move by the interim government was interpreted as an attempt to resurrect a $6 billion bailout from the International Monetary Fund.
ISLAMABAD, Pakistan (Reuters) – Pakistan’s government raised petrol prices dramatically for customers on Friday, paving the way for the IMF’s $6 billion bailout package to be revived and the country’s sagging economy to be stabilised amid rising political turmoil.
The move, which raised gasoline and diesel prices by about 20% — or about 15 cents — a litre, allayed fears that Pakistan, which already has double-digit inflation, would become the latest country to default as financial shocks from the pandemic, the war in Ukraine, and rising interest rates hit many poorer countries.
Analysts say the decision could cost the new coalition government popular support, adding to the political unrest that has engulfed Pakistan since Prime Minister Imran Khan was deposed in a no-confidence vote in Parliament early last month.
“The price raise suggests that the administration has decided to bite the bullet and make difficult decisions, even if it means sacrificing short-term political capital,” said Uzair Younus, head of the Atlantic Council’s Pakistan Initiative. “The increase will calm markets and minimise risk.” It would be vital for the administration to keep up the momentum and make decisions that will help Pakistan emerge from its current dilemma.”