ISLAMABAD: Pakistan has funded a Rs129 billion ($458 million) fuel subsidy through spending cuts and payouts from state-owned enterprises, Finance Minister Muhammad Aurangzeb said on Tuesday, warning that the economic impact of the ongoing Iran war could persist for weeks or months.
The subsidy was introduced in March after a sharp surge in global oil prices triggered by the conflict involving the United States, Israel and Iran, which disrupted energy supplies and shipping routes, particularly through the Strait of Hormuz.
Pakistan, which relies heavily on imported fuel, initially absorbed the shock through a blanket subsidy before shifting toward targeted support for lower-income groups amid limited fiscal space and commitments under a $7 billion IMF bailout program, which comes with strict conditionalities.
Aurangzeb said the government had spent Rs129 billion ($458 million) over three weeks to shield consumers from rising fuel prices and outlined how the subsidy had been financed.
“A blanket subsidy of 129 billion rupees ($458 million) was given… and how was it funded? … 100 billion ($360 million) Public Sector Development Programme (PSDP) has been cut… and further dividends and profits were taken from state-owned enterprises,” the finance minister detailed in an address before the National Assembly.
