As the incumbent government’s Finance Minister headed for Washington for the latest meeting with the International Monetary Fund to secure future loans, rumors of possibly stressful news, with some suggesting that the IMF might refuse to continue with the program, started to catch the air. Abuzz with speculations, the political atmosphere started to hum down as official reports started coming in. As per the initial reports, the finance minister Miftah Ismail, while negotiating the loan program, agreed to the lender’s recommendations to slash subsidies granted on major commodities, especially petroleum.
IMF also put forth a series of preconditions that Pakistan has to meet before IMF releases the pending installment of loans. It demanded steep fiscal adjustments, discontinuation of the amnesty scheme, increase in fuel prices, increase in power tariffs, and restoration of taxes before the country could expect to unlock the $3 billion. After the meeting, Ismail said that he had “good discussions” with the IMF. In the meeting, it was emphasized that Pakistan would remove the subsidy on fuel. Following the meeting, Miftah Ismail, in an interview with foreign media, said that “We can’t afford to do the subsidies we’re doing. So we’re going to have to curtail this”. In the interview, he emphasized that the former Prime Minister, before leaving the office, had set up a financial “trap” for his successor. He added that Imran Khan had derailed the economy through his mismanagement and his ill-thought-out policies, such as the amnesty scheme for businesses.
Finance Minister Ismail, before embarking on the trip, said that “I will go to the IMF, and we will get it restored.” Referring to the recent subsidies on petroleum products announced by the former Prime Minister Imran Khan, he said, “The government will do the required belt-tightening. We will get budget discipline back on track.” However, he added that the Prime Minister had advised the Finance Minister to pass on the minimum possible burden to the people.
To clarify, last month, Prime Minister Imran Khan unveiled a major relief package that included but was not limited to a Rs 10 per liter reduction in petrol prices, bringing the price of petrol down to approximately Rs 150 per liter. He added that the cost would not be revisited before announcing the next budget. Subsequently, the new government came to power and maintained the petrol prices, only to revisit the decision a few days later. Reviewing the decision, Ismail wrote on Twitter that “the decision announced last night” to continue with the prevalent subsidies “was a tough one and will have to be revisited.” He added that the “government was losing Rs. 21 per liter on petrol and Rs at the current pricing. 52 per liter on diesel.” He estimated that at this rate, the government would lose Rs. 250 crore per day or Rs.3600 crore in two weeks, far more than the expense of “running the entire civilian federal government plus the entire BISP/Ehsaas programme.”
It is pertinent to mention that Pakistan went to the IMF in 2019, and under the agreement, Pakistan is to receive about US$6 billion for 39 months, and so far, it has received almost half it. The IMF program is scheduled to end in September.