Finance Minister Miftah Ismail has said that the government is committed to reviving the International Monetary Fund (IMF) programme and putting the country back on a sustainable growth path. In a statement on his return from Doha, Qatar, where talks were held between Islamabad and the fund from May 18th to 25th for the revival of the stalled programme, the finance minister claimed that the country’s finance delegation had very useful and constructive discussions with the IMF team over the last week.
Miftah in his tweet said: “We discussed significant slippages in FY 22, caused in part by the fuel subsidies given in February 2022. 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.” Thus, the government is committed to reducing the budget deficit in FY23, he added. He further said that the IMF team emphasised the importance of rolling back fuel and power subsidies, which were given by the previous administration in contravention of its own agreement with the Fund.
Meanwhile, the International Monetary Fund (IMF) has emphasised the urgency of concrete policy actions on part of the government to remove fuel and energy subsidies and for the upcoming budget for the fiscal year 2022-23 for the revival of the stalled loan programme.
In a statement, the Fund said that an IMF mission led by Nathan Porter held both in-person and virtual discussions in Doha, Qatar, with the Pakistani authorities during May 18-25 on policies to secure macroeconomic stability and support sustainable growth in Pakistan.
At the conclusion of the mission, Porter stated that the mission has held highly constructive discussions with the Pakistani authorities aimed at reaching an agreement on policies and reforms that would lead to the conclusion of the pending seventh review of the authorities’ reform programme, which is supported by an IMF Extended Fund Facility arrangement. Considerable progress was made during the mission, including on the need to continue to address high inflation and the elevated fiscal and current account deficits, while ensuring adequate protection for the most vulnerable, he added.
He maintained that in this regard, the further increase in policy rates implemented on May 23 is a welcome step. On the fiscal side, there have been deviations from the policies agreed in the last review, partly reflecting the fuel and power subsidies announced by the authorities in February. “The team emphasised the urgency of concrete policy actions, including in the context of removing fuel and energy subsidies and the FY2023 budget, to achieve program objectives,” he added
He further said the IMF team looks forward to continuing its dialogue and close engagement with Pakistan’s government on policies to ensure macroeconomic stability for the benefit all of Pakistan’s citizens, according to the statement.
It was the second time that Pakistan and the IMF tried to reach a staff-level agreement on the 7th review of the $6 billion Extended Fund Facility but failed. The disagreement may give a serious jolt to the markets. Earlier, the last PTI government too had failed to convince the IMF to complete the seventh review and release nearly $1 billion loan tranche.