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HomeMonetary PolicyTalks with IMF on Subsidies Remain Indecisive

Talks with IMF on Subsidies Remain Indecisive

The first session of conversations between Pakistan and the International Monetary Fund (IMF) to restart the suspended credit programme remained inclusive, although the global lender continued to demand that subsidies be abolished.

On Saturday, officials from the Finance Ministry reported that the talks with the IMF were an ongoing process and that both sides engaged in virtual sessions, adding efforts to make the second review talks productive.

The IMF loan programme would be revived if the talks were to progress, and the stalled third tranche would be released. The IMF has therefore called for the elimination of subsidies for power stores, electricity and coal.

Sources have suggested that the aim of the IMF to eliminate subsidies is not new, while the government is already working to eliminate subsidies and maintains that targeted subsidies are given primarily to provide relief to deserving individuals.

In this concern, sources said that in order to accept the IMF’s demands to remove excessive subsidies in areas such as utility stores and electricity and gas tariffs, a special cell was created in the Ministry of Finance.

According to the sources, the cell, led by former finance secretary Dr. Waqar Masood, will present its recommendations on the removal of excessive subsidies and the implementation of economic reforms, adding that further action will be taken in the light of the recommendations made by the cell.

The government has assigned Rs209 billion in this year’s budget for subsidies for different sectors. These include Rs150 billion for the energy sector, Rs3 billion for utility stores, Rs13 billion for low-cost wheat supplies, Rs2 billion for metro bus services and Rs30 billion for housing.

The IMF expects Pakistan, as part of the dialogue, to freeze, if not reduce, expenditure on salaries and pensions, civil administration, defense, subsidies, and growth. The point is that the country requested debt relief from developing countries that had already lowered their own wage bills by 1% to 2% and wanted the recipient nations to reciprocate by tightening the belt.

The government is also under pressure to eliminate about nine federal departments that have been transferred to the provinces and may place their skeleton units under the inter-provincial cooperation ministry.



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