IMF Replying Flood Losses and Reduction in Petroleum Prices

IMF is saddened by the loss of humans as well as also livelihood in Pakistan due to flood. IMF has recently extended and size of the program for Pakistan. Program to deal with the confluence of shocks starting with the Covid crisis.

The IMF team is to arrive in November to start preparing for the next review. Currently, the IMF waiting for the assessment of the damages that the World Bank and UNDP conducting. Assessment to lead what kind of repercussions public finance and the impact of the economy.

Based on this IMF will need to update our numbers and our discussions with the authorities. We will listen to them what are their priorities and how Fund can help. Of course, on the issue of subsidy, as in other parts of the world, a subsidy that is targeted to support certain items has proved not to be very effective.

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The subsidies provide to be very regressive. And in our regional economic outlook, we are again looking at this issue that is showing that this is not the best way to use the very limited fiscal space that exists.

Therefore, we are encouraging Pakistan as well as also other countries to move from an untargeted subsidy that is a waste of resources and to dedicate those resources to those who need them.

The region spends on social protection 2 percent of GDP and in certain cases what countries are spending on subsidies could be double that. Therefore, it’s very important to use this moment when challenges are mounting

Where an increase in prices is hurting, reallocate the resources to those who need them most. Part of the IMF conditionalities is part of what is needed in order to provide the right protection for those who need it at a time when inflation is very high.