Pakistan moves another fuel cost onto households as Iran orders banks to fund provincial projects

Two economies under external financial constraint made opposite choices this weekend, and both illustrate how energy and credit get administered when markets are not allowed to clear.

In Pakistan, the Central Power Purchasing Agency asked the National Electric Power Regulatory Authority to raise tariffs by 1.73 rupees per unit under the monthly fuel charges adjustment for August, Dawn reported. The mechanism passes the cost of the fuel actually burned to generate electricity straight through to consumers with a lag. Separately, the government revised the Prime Minister's Fuel Relief Scheme, abolishing text message charges for beneficiaries and aiming the programme at motorcycle, rickshaw and Qingqi users. The pattern is familiar in economies operating under International Monetary Fund programmes: remove the general subsidy, raise the regulated price, then rebuild a narrower targeted transfer for the politically sensitive group.

In Iran, the direction runs the other way. The deputy governor of Mazandaran province for economic coordination said 17,000 billion toman had been allocated to support enterprises in the province, and that the central bank and the first vice president had issued the necessary authorisations, according to IRNA. In Bushehr, the provincial governor called on Bank Saderat Iran to provide 8,000 billion rial in facilities to finish sewerage projects and a section of the Bushehr to Shiraz highway, IRNA also reported.

The Austrian objection applies to both. Pakistan's fuel adjustment at least lets a price signal reach the user, even if the tariff still reflects a state-run generation fleet and its accumulated arrears rather than a competitive cost. Iran's provincial credit allocation does the opposite. It directs bank lending to projects chosen by administrators rather than by savers, which expands the money supply against real output that has not yet been produced. Iranian consumer inflation has run in double digits for years, and directives of this kind are one of the mechanisms that keep it there.

Both governments are managing the same underlying scarcity, which is a shortage of foreign exchange and of investable capital. One is rationing it through price. The other is rationing it through committee.