Pakistan must finalize new fuel pricing plan to secure IMF deal. Here's why

IMF and Pakistan are set to sign a loan agreement after finalizing a fuel pricing plan. The deal would provide $1.1bn to the cash-strapped country.

A long-awaited loan agreement between Pakistan and the International Monetary Fund (IMF) will be signed once a few remaining points, including a proposed fuel pricing scheme, are settled, an IMF official confirmed on Friday.

Pakistan and IMF can sign a loan agreement following a final fuel pricing plan.(Representation Image/ Twitter)

Pakistan and the IMF have been negotiating since early February on an agreement that would release $1.1 billion to the cash-strapped, nuclear-armed country of 220 million people.

The latest issue is a plan, announced by Prime Minister Shehbaz Sharif last week, to charge affluent consumers more for fuel, with the money raised used to subsidise prices for the poor, who have been hit hard by inflation, which in February was at its highest in 50 years.

Petroleum Minister Musadik Malik told Reuters on Thursday that his ministry had been given six weeks to work out the pricing plan.

But the IMF's resident representative in Pakistan, Esther Perez Ruiz, said the government did not consult the fund about the fuel pricing scheme.

Ruiz, in a message to Reuters, confirmed a media report that a staff level agreement would be signed once a few remaining points, including the fuel scheme were settled.

The petroleum and finance ministries did not immediately respond to a request for a comment.

With enough foreign reserves to only cover about four weeks of necessary imports, Pakistan is desperate for the IMF agreement to disperse a $1.1 billion tranche from a $6.5 billion bailout agreed in 2019.