Pakistan’s finance minister, Ishaq Dar, announced that petrol and diesel prices in the country would be raised by Rs 35 due to the severe economic crisis facing the country. The increase in fuel prices is a result of the devaluation of the Pakistani rupee and an 11% increase in the prices of petroleum products in the international market.
To avoid default, Pakistan desperately needs funds from the International Monetary Fund (IMF), but the IMF has set certain conditions for providing the funds. These conditions include a market-based dollar-rupee exchange parity, a high-interest rate, and the imposition of a 17% general sales tax on diesel and petrol within a week.
The country’s foreign exchange reserves hit a new nine-year low of $3.678 billion during the week ending on January 20th. To address this, the Sharif government is planning to cut the salaries of government employees, reduce the number of federal ministers, and curb the expenditure of ministries.
The Prime Minister, Shehbaz Sharif, has recently formed a National Austerity Committee (NAC) to suggest ways to cut costs. The committee has proposed a 10% salary cut for government employees and a 15% reduction in expenditures of ministries and divisions. Additionally, the committee has suggested that the number of federal ministers, ministers of state, and advisers should be reduced from 78 to 30, and the remaining should work on a pro bono basis.
On Friday, Pakistan’s currency depreciated to its lowest against the US dollar and closed at 262.6. At one stage, the currency depreciated to 265 rupees in the open market and 266 rupees in the interbank before making a slight recovery by the end of the day. When the market opened on Friday, the currency fell by 7.17 rupees or 2.73% from Thursday’s close.