THE ‘relief’ in energy prices announced by a beleaguered Prime Minister Imran Khan on Monday is simply a populist move to divert the public anger against his government towards his political opponents, and to also improve his party’s electoral chances in 2023 — or sooner. That is not all.
His government has announced yet another tax amnesty to allow those who had not availed a similar scheme for housing and construction previously to launder their illegitimate wealth by investing it in industry. Obviously, the prime minister is scrambling to win over different segments of society, with the combined opposition turning up the heat through protest rallies and by reaching out to his allies and dissenting PTI lawmakers for a planned vote of no-confidence against him.
It is hard to say at the moment whether the government will survive a vote of no-confidence, or indeed, if the opposition actually has the numbers to succeed in its strategy against him. But notwithstanding the outcome of the exercise, if and when it happens, it is clear that the opposition’s cumulative efforts in this direction over the last one month have disturbed the ruling party.
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The reduction in motor fuel and electricity prices, and the cap on their new rates for the next four months through June, will cost the exchequer Rs130bn. A sum of Rs93bn is earmarked to cushion an upward movement in world oil prices or deterioration in the exchange rate. The latest ‘relief package’ will be financed from the unspent cash allocated for the Ehsaas programme and the money given by the IMF for combating the Covid-19 pandemic, cuts in development funds, dividend income from state-owned energy companies and taxes.
According to Finance Minister Shaukat Tarin, who had been until recently hinting at a further increase in domestic energy prices as the ‘government was unable to keep fuel prices artificially low’, the IMF was on board on the relief package since it will not affect the fiscal deficit target for the year agreed with it. That may be so. But the announcement made out of political compulsions underlines the ad hoc and chaotic approach of the ruling party towards Pakistan’s economic policy.
Over the last three-and-half years, we have seen the government dilly-dallying before accepting the IMF’s harsh funding programme in 2019 to tackle the currency crisis, ditching the lender midway last year to pursue growth and again returning to it later. In the meantime, Mr Khan repeatedly changed the core finance team as he struggled to set a direction for the nation’s economy. That said, the question is: will his latest volte-face on energy prices help the government control the soaring prices, recoup its lost popularity with inflation-stricken low- and middle-income households and fight off the pressure brought by the combined opposition? We should know soon enough.
Published in Dawn, March 2nd, 2022