OPINION
M A Niazi
taxes, which is the government skim-off, up or down, but actually paying the Oil Marketing Companies the difference between the cost and the price at the pump. This was hard cash, which was unfunded, in the sense that the government didn’t know where the money was going to come from. Sooner or later, the government wouldn’t have the money, in which case, it would have a choice between welshing on its debts to the OMCs, or Making hay near petrol fumes is dangerous printing more money and paying them. There are already signs that it has tried welshing, which he shocking thing about the two-step Rs 60 hike in is why power generation plants are shutting down for want of the per litre petrol price is that it still left the governfuel. This is separate from the circular-debt problem bedevilling ment paying a subsidy of Rs 9 per litre. That means the sector. And while the State Bank may well be printing more that the petrol subsidy introduced by ousted PM Immoney, it has not yet done so because of the subsidy. The fall of ran Khan at its peak was costing the exchequer over the rupee does indicate, however, that there are more rupees in Rs 69 per litre. Finance Minister Miftah Ismail also the market than before. said meaningfully that the government was not raising any revenue In this era of fiat currencies, one of the first signs of there from petrol. being a printing of money by the central bank is its fall in value This was a clear signal that the Budget would clear the petrol compared to other currencies. However, if the subsidy had consituation, as the rest of the subsidy was eliminated, and taxes were tinued, the government would have run out of money. The State reimposed. Petrol will go up. At the same time, the main driver of Bank has already been granted, under IMF pressure, autonomy, international oil prices, which has caused the current crisis, the and even under a PTI government ready to cock a snook at the Russo-Ukrainian conflict, is showing no signs of a resolution, which IMF, the State Bank’s refusal to print more notes could have means that there is no decline in oil prices around the corner, at least caused tremors. not so that there can be any planning based on it. Another painful reality is that oil is imported. Therefore, The PTI has got two issues in the fire. The first is whether it a decline in the rupee, even if oil prices remain the same, means would have stuck with the subsidy had it remained in office. The that prices will go up in rupee terms, adding to the burden on the consequences of sticking with the subsidy are extremely serious, and budget, leading it to print yet more rupees, and push down its its has not been removed merely because of IMF orneriness. The IMF value further. may have pushed the government, but the subsidy had to go sooner In a best-case scenario, the government would be unable to or later. pay salaries. In a worst-case scenario, there would be hyperThe reason for this is that it was not simply a matter of taking inflation. Not only does hyperinflation have harsh economic consequences, but it is also grossly destabilizing socially and politically. If the government ran out of money, and stopped paying salaries, the subsidy would stop being paid as well, so government employees would find The writer is a veteran themselves hit by a double whammy. Not only would they find they suddenly have to pay the full journalist and joint editor price of petrol, but their salaries would be worth almost nothing. Petrol would not be the only at Pakistan Today problem. Food would be too. The PTI is trying to guild the lily by saying that Imran would ave got cut-rate petrol from Russia. Somehow or the other, there has been a translation of the Pakistani courtship of the USSR into the belief that he was going to get the same for Pakistan as India has got. While Pak-Russia relations are stop-start, with long periods when Pakistan opposed it, Indo-Russia relations were warm during the Cold War. Just because India has access to discounted Russian oil, does not mean Pakistan would get the same access. There is no record available with the government of any discussion on discounted oil be-
Adding fuel to the fire
T
COMMENT
21
