State Minister for Petroleum Musadik Malik on Friday said that the government was compelled to take the "tough decision" on hiking rates of petroleum products, but the decision was necessary to stabilise the economy, and improve sentiment in the coming months.

Addressing a press conference, Malik, alongside Pakistan Muslim League-Nawaz (PML-N) leader Shahid Khaqan Abbasi, said that the decision was taken after consultation with Prime Minister Shehbaz Sharif and party supremo Nawaz Sharif after the relief package was announced.

“You will see a return of economic stability in coming months,” he said.

“It was a tough decision, but necessary in order to save the country from collapse,” he said.

Malik said that despite the hike, markets were responding positively, “while the rupee is also stabilising and strengthening against the US dollar".

The remarks come after the federal government on Thursday increased petroleum prices by another Rs30 per litre, taking it to its highest level, to meet an International Monetary Fund (IMF) condition for the revival of the EFF program.

Finance Minister Miftah Ismail on Thursday said at a press conference that the increase was necessary for the IMF programme and other subsidies would also be withdrawn in the budget to be announced on June 10, 2022.

He also announced that the federal government has decided to end the tax amnesty scheme announced by the former PTI government. The scheme would not be extended. The finance minister did not rule out an increase in electricity tariff but stated that he has not received any summary in this regard yet.

Following the announcement, equities took a battering as the benchmark KSE-100 Index lost over 900 points during intra-day trading.

Meanwhile, Malik said the previous government did not allocate any funds on the subsidies announced on fuel and electricity.

“The direct cost of these subsidies amounts to Rs300 billion for three months. If taxes are included, then the cost increases to Rs700-800 billion. In comparison, the yearly expenditure of the entire federal government is around Rs528-530 billion,” he said.

He said that prior to its removal, the government made ‘a contract’ with the IMF that prices of petroleum products would be increased, while sales tax and petroleum levy would also be imposed.