Government Plans Petroluem Levy Increase from July 1, Banking on IMF Agreement
Government Eyes Rs5 Hike in Petroleum Levy from July 1 as IMF Deal Prospects Rise
According to a report by The News, Pakistan is expected to implement a Rs5 increase in the Petroleum Development Levy (PDL) on petrol and diesel, effective from July 1, 2023. This move comes as the country aims to secure a broader agreement with the International Monetary Fund (IMF) and enters into a fresh bailout package under the Standby Arrangement (SBA) worth $2.5 billion for the next six to nine months.
As the chances of accomplishing the ninth review under the $6.5 billion Extended Fund Facility (EFF) program dwindle, the government contemplates raising the petroleum levy from Rs50 to Rs55 per liter of petrol and diesel. This hike is seen as a step closer to finalizing the fresh SBA program, crucial for averting a balance of payment crisis and potential default in the coming months.
Although the IMF deal remains a possibility, the government will still need to increase the PDL at the start of the next fiscal year. The Ministry of Finance has shared with the Senate Standing Committee on Finance that the petroleum development levy has been set at Rs60 per liter to achieve a target of Rs879 billion for the upcoming fiscal year. This is in contrast to the revised target of Rs542 billion for the current financial year ending on June 30, 2023.
To facilitate the hike in the petroleum levy, the government sought powers for amending the Petroleum Products (Petroleum Levy) Ordinance, 1961 through the Finance Act 2023-24. Previously, parliamentary approval was required to determine the maximum limit of the petroleum levy.
The timeline for receiving the Memorandum of Economic and Financial Policies (MEFP) for the fresh SBA program, spanning six to nine months, remains uncertain. The MEFP is a crucial element for reaching a broader agreement, and without it, a staff-level agreement cannot be signed.
Pakistan and the IMF recently held consultations to determine the way forward, weighing two options in their discussions.
