ISLAMABAD: Pakistani finance minister, Miftah Ismail said on Thursday the International Monetary Fund (IMF) had, during recent talks to revive a loan program, “emphasised” the importance of rolling back fuel and power subsidies introduced by the last government of Prime Minister Khan.
Pakistan will be giving more than $2 billion in subsidies to the oil and power sectors from April to June, which was announced by Khan in his last days in power. Fuel and electricity prices have been the subject of public pressure amid double-digit inflation.
Talks between Pakistan and the IMF team for the revival of a $6 billion loan program were concluded on Wednesday in Doha.
Media reports widely suggested Pakistan and the IMF had worked out the outlines for the release of over $900 million in funds that would come through once Pakistan removed its fuel subsidies.
Ismail said the Pakistani delegation had “very useful and constructive” talks with the IMF team over the last week in which significant slippages in fiscal year 2022, caused in part by the fuel subsidies given in February, were discussed.
“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 [government] is committed to reviving the IMF program & put Pakistan back on a sustainable growth path,” Ismail said in a Twitter post.
“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,” Ismail said. “Thus govt [government] is committed to reducing the budget deficit in FY23.”
Earlier on Wednesday night Nathan Porter, leading the IMF mission, said his team had “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 mission head said considerable progress was made during the talks, including recognition of the need to address high inflation and elevated fiscal and current account deficits while ensuring adequate protection for the most vulnerable in Pakistan.
During the discussion with the IMF team, Pakistani authorities sought program extension until June 2023 with increased loan size of up to $8 billion.