Pakistan did not consult before petrol subsidy announcement, IMF

IFI is seeking further details on scheme's methodology, costs, objectives, prevention of fraud and abuse and countermeasures, Easter Perez

International Monetary Fund Country Representative for Pakistan Easter Prez has said that Pakistani officials did not consult with IMF staff before announcing their latest proposal for gasoline subsidies.

“The IMF is seeking further details on the scheme’s methodology, costs, objectives, prevention of fraud and abuse and balancing measures,” Easterprise told British daily Business Recorder in a message on Tuesday morning. Will carefully discuss the matter with the authorities”.

This statement by the IMF comes after Prime Minister Shehbaz Sharif’s announcement on Sunday that the country’s low-income segment will be given a subsidy of Rs 50 per liter on petrol through a new relief package.

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The IMF rejects unfunded and untargeted subsidies and instead, advocates increased social protection for the poorest. Minister of State for Petroleum Mossadegh Malik said in a statement that the Prime Minister has ordered a subsidy of Rs 100 on petrol for low-income people. A subsidy will be provided.

Ester Perez said that the IMF considers the unconditional sponsorship cash transfer scheme as the most direct way to help the needy in Pakistan.

The development potentially means that a staff-level agreement could take some time as officials are busy negotiating with the IMF. The government has repeatedly expressed hope that its bailout program, stalled in the ninth review since November last year, will soon be revived.

As a result of recent negotiations with the IMF, Pakistan has imposed additional taxes, increased electricity and gas prices, moved the exchange rate to market rates, and eliminated unfunded subsidies.

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These steps mean that Pakistan has completed almost all the pre-emptive measures except for the external financing that the IMF wants it to receive in exchange for $1.1 billion in payments under the Extended Fund Facility starting in 2019. But no progress has been made yet.

Talking about the staff-level agreement, Esterprez said that in recent days there has been considerable progress in the discussions regarding the policies to take forward the ninth review.

He said that ensuring the provision of financial assistance to Pakistan to support the implementation of the policy agenda is the first priority, staff-level agreement will be reached as soon as some remaining points are implemented.

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