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Pakistan Raises Fuel Prices in Effort to Stabilize Economy

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The interim government’s move was seen as a bid to revive a $6 billion bailout from the International Monetary Fund.ISLAMABAD, Pakistan — Pakistan’s government on Friday sharply increased fuel prices for consumers, paving the way to revive a $6 billion bailout package from the International Monetary Fund and stabilize the country’s cratering economy amid deepening political turmoil.The move raising gasoline and diesel prices by about 20 percent — or about 15 cents — a liter staved off concerns that Pakistan, which already faces double-digit inflation, would join a wave of global defaults as the financial shocks from the pandemic, the war in Ukraine and rising interest rates batter many poorer nations.But the decision may cost the new coalition government popular support, analysts say, adding to the political uncertainty that has embroiled the country since Prime Minister Imran Khan was ousted in a no-confidence vote in Parliament early last month.“The price hike signals that the government has decided to bite the bullet and make choices that are necessary, even if they cost near-term political capital,” said Uzair Younus, the director of the Pakistan Initiative at the Atlantic Council. “The hike will ease markets and reduce uncertainty. It will be critical for the government to maintain momentum and continue making decisions that get Pakistan out of the current crisis.”Since his ouster, Mr. Khan has held a series of political rallies, drawing huge crowds and heavily criticizing the current coalition government and the military, blaming them for his removal from office. Some officials now fear that the government’s move to appease the I.M.F. could hand Mr. Khan a wave of public outrage that he could manipulate on the streets.Former Prime Minister Imran Khan, at top center in dark vest, leading an antigovernment rally in Islamabad on Thursday.Aamir Qureshi/Agence France-Presse — Getty ImagesDiscussions between the I.M.F. and the new interim government, led by Shehbaz Sharif, had been deadlocked for weeks over the terms of reviving the bailout, which was announced in 2019 and later suspended after Pakistan’s previous government failed to meet some loan conditions, like cutting energy subsidies.Pakistan has hoped for a release of a roughly $900 million seventh tranche of the $6 billion I.M.F. bailout package. Earlier this week, a fresh round of talks between the I.M.F. and the new Pakistani government in Doha, Qatar, appeared to fail after fund officials declined to accept the Pakistani request to delay the ending of government subsidies.Mr. Sharif had been reluctant to end government energy subsidies and roll back unfunded subsidies to oil and power sectors — a key I.M.F. demand — fearing public backlash that could diminish his party’s chance of success in the next general elections.Those elections are scheduled to be held next year, but the new government has come under mounting public pressure from Mr. Khan’s supporters to hold them earlier.On Thursday, Mr. Khan warned the government to announce the next elections and dissolve Parliament within six days. The warning came just after he led thousands of supporters to the capital Wednesday evening. Angry supporters clashed with the police in the capital and several other Pakistani cities. At least 1,700 protesters were arrested by the police in Punjab, the country’s most populous province.That political pressure has added to the new government’s reluctance to embark on meaningful economic reforms that, while important to stabilize the economy in the years to come, would cause immediate pain to Pakistanis’ wallets, analysts say.The interim government, led by Shehbaz Sharif, center, has been deadlocked in talks with the International Monetary Fund.Saiyna Bashir for The New York TimesLate Thursday night, drivers desperate to fill their tanks before the price increase went into effect after midnight flocked to gas stations across major cities. Many drivers’ incomes have already been squeezed by soaring inflation in recent years that has pushed up the price of basic goods.“There is no rise in our income proportional to the rise in the price of fuel and other essential items,” said Saleem Khan, 44, as he waited to fill his motorcycle’s tank at a gas station in the port city of Karachi.Mr. Khan makes around 18,000 rupees, or about $90, a month working in a restaurant in the city. In previous months, he could send nearly 10,000 rupees every month to his relatives in Bajaur, a tribal district bordering Afghanistan.“This month, it seems I’ll be able to send barely 7,000 rupees to my family,” he said.Nearby, Rasheed Ahmed, a garment factory worker, sat on his motorcycle, worrying how he would pay for basics like food and rent with the fuel price increase.“We thought the ousting of Imran Khan will help the country in decreasing the fuel prices, but the current rulers are crueler than the previous government,” Mr. Ahmed, 34, said.The new coalition government has struggled to find its bearings since coming to power in early April and is in a particularly precarious position. It has no electoral mandate, but was chosen by Parliament to take over after Mr. Khan’s ouster. And it is a tenuous coalition of political parties that previously clashed frequently and only came together around the singular aim of removing Mr. Khan from office. Mr. Sharif’s party also faces internal divisions over policy decisions.A market in Islamabad last month. Many Pakistanis are worried about their ability to afford basic necessities as inflation rises.Saiyna Bashir for The New York TimesMr. Khan’s government, before its removal from office, was also facing increasing public discontent over rising inflation. Mr. Khan claims that the economy was improving under his government, but in order to soothe the public’s flaring tempers, he announced he was cutting petroleum and energy prices — a move that eased public discontent but added to the country’s fiscal deficit.Understand the Political and Economic Turmoil in PakistanCard 1 of 5A chaotic time. More

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    Inflation Batters Pakistan and Puts Pressure on Imran Khan

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    Rising prices and a weakened currency are straining households, intensifying pressure on Prime Minister Imran Khan to find solutions.Muhammad Nazir canceled his daughter’s wedding. He parks his motorcycle at home and walks to his shop. Many of his shelves are empty because he can’t afford to stock the same supply of candy, soft drinks and cookies that he once did.A growing number of his customers can’t buy his snacks anyway. The global inflation wave has dealt a severe blow to Pakistan, a country of 220 million people already struggling with erratic growth and heavy government debt.As the cost of food and fuel eats up a larger share of meager incomes, people are putting pressure on the government of Prime Minister Imran Khan to do something.“I am not making any profit these days,” Mr. Nazir, 66, said from his shop in Sohawa, a town about 50 miles southeast of Pakistan’s capital of Islamabad. “Still, I come here every day, open the shop and wait for customers.”Surging prices have imperiled President Biden’s agenda in the United States and hit shoppers from Germany to Mexico to South Africa. But they are having a particularly nasty effect in Pakistan, a developing country already prone to political instability and heavily dependent on imports like fuel. The effect has been worsened by a sharp weakening of Pakistan’s currency, the rupee, giving it less purchasing power internationally.Pakistan’s economy has been in and out of crisis since Prime Minister Imran Khan came to power in 2018.Didor Sadulloev/ReutersWhile inflation is expected to ease as supply-chain bottlenecks unsnarl, Pakistan feels it can’t wait. On Monday, the government announced that it had reached an agreement with the International Monetary Fund for the first $1 billion of what is expected to be a $6 billion rescue package.“The economy is the biggest threat that the government is in fact facing right now,” said Khurram Husain, a business journalist in Karachi. “This is basically eroding the very basis of their public support.”Protests organized by opposition parties have broken out across Pakistan in recent weeks, causing Mr. Khan’s political allies to examine their loyalties. The Pakistan Muslim League-Q, or P.M.L.-Q, party, which is in a coalition with Mr. Khan, said this month that it was becoming difficult to remain part of the government.“Our members of Parliament are feeling a lot of pressure in their constituencies,” said Moonis Elahi, Mr. Khan’s minister for water resources and a member of P.M.L.-Q. “Some even suggested leaving the alliance if the situation doesn’t improve.”Government officials have downplayed the recent surge in inflation, saying it is a global phenomenon. Mr. Khan has also blamed the foreign debt burden he inherited from the previous government.“The government spent the first year in stabilizing the economy, but when it was close to stabilizing it, the country faced the biggest crisis in 100 years: the coronavirus epidemic,” he said, adding, “No doubt the inflation is an issue.”Officials also cite price comparisons of fuel costs with neighboring countries, like India, claiming that Pakistan is still better off. Pakistanis have seen standard gas prices jump 34 percent in the last six months, to about 146 rupees a liter.Filling up the tank in Peshawar in early November. Pakistan imports a large portion of its oil, diesel and gasoline.Bilawal Arbab/EPA, via ShutterstockPakistan has been rushing to tamp down inflation and get the money it needs to keep buying abroad. Last week, Pakistan’s central bank sharply raised interest rates, a move that could help cool price increases but one that could crimp economic growth.Mr. Khan’s government reached out to Saudi Arabia for a lifeline. The Saudi crown prince, Mohammed bin Salman, pledged $4.2 billion in cash assistance. Members of his government are also chasing loans from China that they say are needed to complete crucial power-sector projects that are part of the $62 billion China-Pakistan Economic Corridor.Pakistan’s economy has been in and out of crisis since Mr. Khan, a former cricket star, came to power in 2018. But other periods of inflation were felt mainly by the rich, economists say. This bad turn is affecting everyone.Inflation surged 9.2 percent in October from the year before, according to government data. Food-price inflation is crushing Pakistan’s poorest residents, who already normally spend more than half of their incomes on food. The cost of basic food items shot up this month by 17 percent year over year, government data show. Pakistan’s biggest food import is palm oil, which has jumped in price.In the United States, food prices have risen 4.6 percent.In terms of energy, Pakistan imports about 80 percent of its oil and diesel and about 35 percent of its gasoline, according to Muzzammil Aslam, a spokesman for the finance ministry. The cost of electricity in Pakistan is already twice as much as in countries like India, China and Bangladesh.“The economy is not well,” Mian Nasser Hyatt Maggo, the president of the Federation of Pakistan Chambers of Commerce & Industry, a Karachi-based industry group, said simply.A charity worker served inexpensive dishes to laborers and others along a roadside in Karachi in June. The government subsidizes the cost of foods like grains, legumes and cooking oil.Asif Hassan/Agence France-Presse — Getty ImagesUnemployment has risen sharply, too, particularly among college graduates in cities. The number of people falling into poverty is up.Understand Rising Gas Prices in the U.S.Card 1 of 5A steady rise. More