IMF asks Pakistan to cut energy subsidies

In a rebuke to Pakistan, the IMF has asked it to cut its energy subsidies saying they were crippling its economy, just hours after beleaguered Prime Minister Yousuf Raza Gilani bowing to political pressure reversed the controversial fuel price hike.

Terming the energy subsidies as "inefficient and untargeted," IMF spokeswoman Caroline Atkinson said these subsidies were consuming a large part of the country's budget.

Atkinson said bulk of the energy subsidies were being cornered by people of higher income group and large companies and Pakistan government should make efforts that its spending on energy subsidies should go towards the social sector, health, education and dealing with the after impact of the floods.

The International Monetary Authority in 2008 rescued Pakistan from bankruptcy and has extended an $11.3 billion stand-by arrangement.

"Just to clarify, the action on energy subsidies, petroleum prices, was not a part of the IMF program. However, energy subsidies consume a large part of the budget," Atkinson said at a news briefing.

She said the IMF arrangement with Pakistan was due to come to an end at the end of December but was extended for nine months so it now will expire at the end of September.
 
"That's to give space for us to continue to discuss with the government the two further disbursements that are allowable under the program and that continues to be the case.
 
What's most important for our arrangement is the ability to discuss with the government, to agree with the government, on the measures that they are going to put in place the economy can support," she said.
 
"We continue to work with Pakistan to see if we can reach agreement on measures that the government can put in place to put its economy on a sounder footing," Atkinson added.