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Government subsidy plan raises concerns in IMF

The ninth review of the financially-strained $6.5 billion Extended Fund Facility (EFF) from the International Monetary Fund (IMF) appears to have diminished, following the global lending institution's recent queries concerning the government's novel fuel subsidy program.

Islamabad, 21 March 2023 (GNP): According to Bloomberg’s report on Tuesday, Esther Perez Ruiz, the International Monetary Fund’s (IMF) Resident Representative for Pakistan, stated that the Pakistani government did not seek the global lending institution’s input before deciding to hike fuel prices for affluent drivers to fund a subsidy for the nation’s lower-income populace. 

Bloomberg reported on Tuesday that Esther Perez Ruiz, the Resident Representative of the International Monetary Fund (IMF) for Pakistan, revealed that Islamabad did not seek consultation from the IMF before devising a plan to raise fuel expenses for affluent motorists to finance a subsidy for the less affluent population of the country. 

Ruiz stated that the IMF staff is requesting more comprehensive information regarding the program’s implementation, expenses, focus, measures to prevent fraudulent activities, and counterbalancing tactics. The staff will thoroughly deliberate these aspects with the government officials. 

In its assessment, the IMF stated that Pakistan has made significant strides in fulfilling its policy obligations, which are necessary for the financially constrained nation to obtain access to multibillion-dollar loans and avoid a default. 

Also Read: Pakistan to complete IMF program, Dar assured US

To restart a $6.5 billion IMF loan agreement, Islamabad has made challenging choices, such as raising energy costs and taxes, and permitting the rupee to depreciate. The money received from the IMF, based in Washington, will offer some respite to Pakistan’s struggling economy, which is still reeling from the devastating flooding that impacted a third of the country’s territory. Furthermore, as general elections approach this year, the loan will assist Pakistan in recovering from an economic crisis. 

The IMF’s Resident Representative for Pakistan stated that a staff-level agreement will ensue once the remaining issues are resolved. 

She further stated that the topmost priority is to ensure that there is enough funding available to support the government in implementing their policy plans. 

The Finance Minister Ishaq Dar stated that the IMF requested Pakistan’s allies to fulfill their pledges to enhance the country’s financial situation before finalizing the bailout package. Pakistan must repay roughly $3 billion in debt by June, with an additional $4 billion expected to roll over.