IMF demands removal of fuel subsidy to revive loan program

May 25, 2022 (MLN): While appreciating the recent hike in the policy rate by the State Bank of Pakistan (SBP), the International Monetary Fund (IMF)’s mission on Wednesday emphasized the need of removing fuel and energy subsidies to avail the next tranche under Extended Fund Facility (EFF) program.

According to media reports, despite week-long negotiations, the Pakistan side could not convince the IMF mission to release the tranche as IMF has subjected the $3 billion EFF program with the removal of fuel subsidies.

IMF side emphasized the urgency of concrete policy actions, including in the context of removing fuel and energy subsidies and the FY2023 budget, to achieve program objectives.

The IMF’s 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 program, said a statement issued by IMF on Wednesday.

Considerable progress was made during the mission, including the need to continue to address high inflation and the elevated fiscal and current account deficits, while ensuring adequate protection for the most vulnerable. In this regard, the further increase in policy rates implemented on May 23 was a welcome step, the statement added.

On the fiscal side, there have been deviations from the policies agreed upon in the last review, partly reflecting the fuel and power subsidies announced by the authorities in February.

The government’s discussion with International Monetary Fund (IMF) pertaining to the bailout package under EFF program has concluded today.

IMF mission led by Mr. 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.

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