ISLAMABAD, Jan 14: The caretaker government is working on various proposals to increase oil prices and contain inflation, says Finance Minister Dr Salman Shah.

The government was left with no option but to review the situation and take certain measures, particularly raising oil prices to avoid piling up economic problems, he told Dawn on Monday.

He said it was becoming extremely difficult to continue paying Rs14 billion subsidy a month by not raising petroleum prices. The issue has started “impacting” the economy.

The president and the caretaker prime minister, he pointed out, had been apprised about numerous threats to economy with a view to making certain early “adjustments”, particularly with regard to oil prices.

He said that oil prices which had touched $100 a barrel demanded urgent upward revision of the domestic petroleum prices.

However, he said, that despite shocks and unfavourable circumstances the economy was still doing well.

“But international oil prices and the politics of violence and terrorism could land us in a big problem,” the finance minister warned.

Responding to a question, Dr Shah said the government would have to take bold and unpopular decisions during the remaining six months of the 2007-08 financial year.

He was confident that despite problems, the government would achieve 6.5 to seven per cent Gross Domestic Product (GDP) growth rate during the current financial year.

He said that President Pervez Musharraf and Caretaker Prime Minister Mohammedmian Soomro attended a meeting on Sunday to discuss the prevailing economic situation.

According to sources, the finance minister and senior officials informed the president and the prime minister about the deteriorating situation.

They were told that offering subsidies on account of oil, fertiliser and wheat was no more feasible, especially due to reluctance of the government to increase oil prices.

The meeting was also informed that most of the countries, including India, had adjusted their oil prices and that Pakistan should do the same to protect the economy from suffering more sever blows.

However, some people in the meeting suggested that the increase in oil and other prices should be left to the elected government and that the caretaker set-up should concentrate on holding violence-free and transparent elections on Feb 18.

The president, the sources said, said he would make ensure that there was no rigging in the elections and that the economy continued to perform well in the coming months.