ISLAMABAD, Pakistan – Prime Minister Imran Khan of Pakistan announced on Monday that he was cutting fuel and electricity prices to offset rising global energy prices caused by Russia’s invasion of Ukraine.
The surprising move comes at a time when Mr. Khan faces mounting political discontent at home, and opposition parties are planning large protest rallies in March against rising inflation and Mr. Khan’s dealings with the economy.
Fuel and electricity prices have soared in Pakistan in recent months as Mr Khan’s government implemented painful reforms under an International Monetary Fund bailout package. Earlier in February, the IMF approved the release of a $1 billion tranche of a $6 billion package after lengthy negotiations with Pakistani officials.
In a comprehensive televised speech on Monday, Mr Khan said he was cutting petrol and diesel prices by the equivalent of about 22 cents per gallon and electricity rates by about 3 cents per kilowatt hour.
The cuts will take effect on Tuesday and will remain in effect until June, he said, when the next fiscal year begins.
Mr Khan defended his government’s handling of the economy, claiming that he had inherited a weak economy that was beset by massive internal and external deficits.
Mr Khan, a former cricketer turned politician, won the general election in 2018, basing his campaign on an anti-corruption and an anti-US foreign policy campaign. Since taking power, he has struggled to stabilize a weak economy and relations with the United States have cooled.
However, he has often praised China, a long-standing ally of Pakistan, and has courted Russia’s President Vladimir V. Putin.
No deal on a pipeline has been announced, but in his speech on Monday, Mr Khan said Pakistan had agreed to purchase 2 million tons of wheat from Russia.
He did not comment on Russia’s invasion of Ukraine, but said in a statement after his meeting with Mr Putin on Thursday that he “deplored the latest situation between Russia and Ukraine” and hoped “diplomacy could prevent a military conflict”.
Analysts said the easing in energy prices would prove temporary as inflationary pressures on the economy mount.
“The subsidies will only increase the budget deficit and are completely contrary to the agreements made with the IMF,” said Uzair Younus, director of the Pakistan Initiative at the Atlantic Council. Increased deficits and loans will put pressure on the rupee in the coming weeks, crowding out private investment and creating medium-term economic instability and vulnerabilities.
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Khalid Mahmood Rasool, a newspaper columnist from Lahore, described the measures as “an abrupt counterbalance to the mounting political heat”.
The opposition Pakistan Peoples Party has started a protest march from the southern port city of Karachi that is expected to reach Islamabad, the capital on March 8.
Opposition parties are also currently engaged in intense negotiations to issue a no-confidence vote in parliament against Mr Khan.
“The announcement of a cut in gasoline and electricity prices is a last-ditch but failed attempt to save his job,” said Marriyum Aurangzeb, the information secretary of the opposition Pakistan Muslim League-Nawaz party.
She said Mr Khan’s government had increased fuel and electricity tariffs significantly more than the cuts announced Monday over the past three years.
Mr Khan also announced tax exemptions in the information technology sector, cash aid to farmers and interest-free loans to students and low-income people to start businesses and build houses.
