Government Considers Restoring Fuel Conservation and Austerity Measures

Policy Update: The Federal Government is reportedly considering the reinstatement of fuel conservation and austerity measures as early as this week or next, following renewed geopolitical tensions in the Middle East that have contributed to rising global oil prices and increased pressure on Pakistan’s foreign exchange reserves.

According to a report published by Dawn, citing a senior government official, Prime Minister Shehbaz Sharif has reviewed the proposed measures during discussions over the past week. The matter is expected to be placed before the Federal Cabinet for formal consideration and approval.

Among the measures under review are those previously introduced in March, including the implementation of a four-day working week, a 50% reduction in government staff attendance, a 50% cut in the use of official vehicles, greater reliance on virtual meetings, restrictions on official foreign travel and non-employee expenditure, reduced motorway and highway speed limits, and salary reductions for higher-income public sector employees.

The government is also evaluating proposals to expand the use of online educational classes and reintroduce restrictions on market and commercial operating hours as part of broader energy conservation efforts.

These measures were withdrawn during the third week of June after the United States and Iran reached a ceasefire understanding, resulting in temporary stability in international oil markets. However, the recent increase in oil prices has prompted the government to reconsider the earlier policy framework.

Officials have indicated that the final decision will be based on political consultations as well as technical assessments provided by the Ministry of Finance and the State Bank of Pakistan (SBP).

The Government has, in principle, resolved to limit further pressure on the country's foreign exchange reserves, which declined from US$23.99 billion at the beginning of the month to approximately US$22.67 billion as of July 10. At current levels, the reserves provide slightly more than three months of import coverage.