Pakistan plans to phase out politically sensitive fuel subsidies during the new financial year that starts today as it tries to bring a ballooning budget deficit under control, according to senior Pakistani officials.

The government spent $2.4bn (€1.5bn, £1.2bn) during the fiscal year that ended yesterday to subsidise domestic fuel prices and protect consumers from rising global oil prices. But this has resulted in a rise in the budget deficit, which is expected to reach about 6.5 per cent of gross domestic product, leading to a rethink by government ministers.