Talks between Pakistan and IMF have been fruitless. The IMF has demanded that the subsidy on petrol and electricity be withdrawn, while the next budget for releasing the next installment of the program will also be presented in accordance with the IMF conditions. Sources say the talks will resume next week.
According to details, staff level agreements between Pakistan and the IMF have been fruitless, mainly due to the government’s refusal to withdraw fuel and electricity subsidies.
Now the IMF has made it a condition of the 6 6 billion program to revive the subsidies and to present the next budget 2022-23 in accordance with IMF terms. However, talks between the IMF and Pakistani officials will continue.
However, the IMF program will now be revived only if the government raises petrol and electricity prices.
In talks in Doha from May 18 to May 25, the IMF called on Pakistan to end unsubsidized subsidies on fuel and to present the next budget to parliament in accordance with the Memorandum of Agreeable Monetary and Economic Policies (MEFP). Be done
Pakistani officials involved in the talks said that the IMF had set a precondition for withdrawing fuel subsidies to revive the program. A statement issued by the IMF said that the talks with the Pakistani authorities have been very constructive.
Good progress was also made in the negotiations, which were aimed at curbing rising inflation, resolving financial and current account deficits and providing protection to troubled units.
In this regard, raising interest rates is a welcome step. While financially agreed policies have been deviated from which include petrol and electricity subsidies.
The statement further said that the IMF team would continue the dialogue, while the IMF was committed to ensuring macroeconomic stability for the benefit of all Pakistanis. However, when the correspondent contacted the IMF Resident Chief, he said that the IMF would issue a statement in this regard.
Following the completion of the sixth review in February, when the IMF released a 1 billion tranche, the PTI government announced non-funded subsidies. The IMF had raised objections. However, after leaving the PTI government, Finance Minister Muftah Ismail had said that there was no provision for giving fuel subsidies. The IMF has now made sending its review mission in May 2022 conditional on the withdrawal of fuel subsidies.
A senior Pakistani official told this correspondent that talks between Pakistan and the IMF would resume next week to see progress on eliminating fuel subsidies, which would pave the way for the completion of the seventh review. ??? 1 billion will be released under FF.
Dr Khaqan Najib, a former adviser to the finance ministry, said it was unfortunate that the seventh IMF review was inconclusive. It will also affect other lenders and friendly countries.
He stressed that in order to complete the review, Pakistan would have to plan better targets for petroleum and energy subsidies to minimize commodity and financial impact. It seems that the differences with the IMF in this regard cannot be resolved.
It is also hoped that the FBR will prepare good legislation on personal income tax reform, which will be due by the end of February, 2022. While it is hoped that some categories of taxes will increase. Consensus with the IMF is also time bound, and conditions must be met before the 2023 budget can be finalized in June.
He added that the completion of the seventh review of the IMF was likely to end the uncertainty at a time when external financial needs for fiscal year 2022 had reached 32 32 billion.
With the decline in Forex reserves, the rupee was depreciating and the country was on the verge of bankruptcy. However, the steps required by the authorities will take some time in order to gain IMF support and create economic stability. At the same time, policy makers know that they need to take the necessary steps to control the market.
