IMF conditionally agrees to continue loan program after hiking POL, power rates

ISLAMABAD: The International Monetary Fund (IMF) has set a condition to continue the loan program for Pakistan after the hike in the rates of petroleum products and electricity, whereas, Finance Minister Miftah Ismail blamed the previous government of Pakistan Tehreek-e-Insaf (PTI) for violating the promises made to the IMF by giving fuel subsidies.

The IMF sets a difficult condition for Pakistan to receive another tranche of loan if the government agrees to raise petrol and electricity prices.

Talks between Pakistan and IMF were held in Doha, Qatar. The IMF has refused to release the next tranche of the loan without raising the price of petroleum products.

The IMF has agreed to all the demands of Pakistan and backed the Pakistani government’s action plan to provide relief, especially to the poverty-stricken nationals.

Sources said that the IMF loan’s tranche will not be released without an increase in the price of petroleum products.

The Pakistani delegation will respond to the IMF after talks with Prime Minister Shehbaz Sharif. In this regard, the statement of the IMF Mission Chief for Pakistan has been issued.

Miftah Ismail wrote on Twitter, “I have just returned from Doha after talks with the IMF. Our delegation had very useful and constructive discussions with the IMF team over the last week. We discussed significant slippages in FY 22, caused in part by the fuel subsidies given in February 2022.”

“We discussed targets for FY 23, where, in light of high inflation, declining forex reserves and a large current account deficit, we would need to have a tight monetary policy and consolidate our fiscal position. Thus govt is committed to reducing the budget deficit in FY23.”

“The IMF team emphasised the importance of rolling back fuel & power subsidies, which were given by the previous administration in contravention of its own agreement with the Fund. Govt is committed to reviving the IMF programme & put Pakistan back on a sustainable growth path,” said the finance minister.

I have just returned from Doha after talks with the IMF. Our delegation had very useful and constructive discussions with the IMF team over the last week.

We discussed significant slippages in FY 22, caused in part by the fuel subsidies given in February 2022. 1/3

— Miftah Ismail (@MiftahIsmail) May 26, 2022

IMF’s statement

The mission of the global financial institution led by Nathan Porter held both in-person and virtual discussions in Doha, Qatar with the Pakistani authorities during May 18-25 on policies to secure macroeconomic stability and support sustainable growth in Pakistan.

At the conclusion of the mission Porter, issued the following statement which read, “The mission has held highly constructive discussions with the Pakistani authorities. Both aimed at reaching an agreement on policies and reforms that would lead to the conclusion of the pending seventh review of the authorities’ reform program, which is supported by an IMF Extended Fund Facility arrangement.”

“Considerable progress was made during the mission, including on the need to continue to address high inflation and the elevated fiscal and current account deficits, while ensuring adequate protection for the most vulnerable.”

“In this regard, the further increase in policy rates implemented on May 23 was a welcome step. On the fiscal side, there have been deviations from the policies agreed in the last review, partly reflecting the fuel and power subsidies announced by the authorities in February.”

“The team emphasized the urgency of concrete policy actions, including in the context of removing fuel and energy subsidies and the FY2023 budget, to achieve program objectives.”

“The IMF team looks forward to continuing its dialogue and close engagement with Pakistan’s government on policies to ensure macroeconomic stability for the benefit all of Pakistan’s citizens,” it added.