IMF suggests revoking govt subsidies in Pak, talks scheduled on May 18

The talks between Pakistan and the International Monetary Fund (IMF) are expected to begin next week in Doha, local media reported on Monday.

The Express Tribune reported that the IMF has informed the country's government that it could send a mission to Doha for one week on May 18 for talks with Pakistan on the revival of the Extended Fund Facility, said the officials.

However, Prime Minister Shehbaz Sharif will have to overcome all obstacles from his cabinet members before that and has to make a decision on fuel subsidies.

Earlier, Pakistan Finance Minister Miftah Ismail had said that the IMF wants the country to revoke the subsidies extended by the Imran Khan government by increasing fuel prices and power tariffs, to revive its Extended Fund Facility (EFF).

Noting that the fund had set a series of prior conditions involving steep fiscal adjustment close to Pakistani rupees 1.3 trillion, the finance minister said that the IMF wants fuel prices raised to breakeven and taxes restored, amnesty scheme discontinued for industries, circular debt reduced, power rates increased and fiscal savings ensured in order to completely reverse the February 28 relief package extended by the previous government, reported the Dawn newspaper.

Notably, the previous government had a commitment to have a primary balance of PKR 25 billion which was now in deficit at PKR 1.3 trillion.

The minister had stressed that the IMF's greater focus was on ending fuel subsidy, which is creating a fiscal hole while the power tariff could be delayed as it does not have a direct bearing on the budget. He also hinted at doing away with tax amnesty for industries at the outset.

Notably, the oil prices in Pakistan have become Hobson's choice for the government as no budgeting could possibly be done with an over PKR 150 billion subsidy on oil alone, however, raising the oil prices as per international market rates will invite a strong public reaction against the government.

According to sources, the capping of oil prices, amounting to a subsidy of 150 billion Pakistani rupees per month, by the Imran Khan government towards the end of its tenure has become a major concern for the present government that sees it as a trap to sabotage the Shehbaz Sharif-led administration, reported The News International.

Pakistan is already grappling with a massive rise in foreign debt and its economy is slumping due to low investment, low exports, and low productivity growth cycle which highlights the structural weaknesses of country's economy.