IMF said the program would be revived only after the government increases the fuel and electricity prices
The talks between Pakistan and the International Monetary Fund (IMF) have failed as the two sides could not reach a staff-level agreement mainly because of the government’s inability to increase fuel and electricity prices.
Now a deadlock persists between the two sides, with IMF linking the revival of stalled $6 billion Extended Fund Facility (EFF) program to a price hike in the country by removing fuel and power subsidies. The IMF is also pressing the coalition government to present the next budget for fiscal 2022-23 in line with the objectives of the IMF program.
The under-question subsidies on fuel and electricity were provided by the PTI government earlier this year and the coalition government is finding it hard to reverse those unfunded subsidies. Pakistani negotiators failed to provide any details of the negotiations, except for saying “The talks will continue”.
The IMF and Pakistan authorities are in Doha to negotiate on the revival of the program, which the Pakistani negotiators said has been conditioned with the withdrawal of fuel subsidies.
According to a statement issued by the IMF after review talks Wednesday night from Washington, a Nathan Porter-led IMF mission held both in-person and virtual talks with the Pakistani authorities in Doha, Qatar from May 18 to May 25. Policies to secure macroeconomic stability and support sustainable growth in Pakistan were mainly discussed during the latest round.
“Considerable progress was made during the mission, including on the need to continue to address high inflation and elevated fiscal and current account deficits, while ensuring adequate protection for the most vulnerable. In this regard, an increase in policy rates was a welcome step,” The statement issued at the conclusion of the discussions read.
“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 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 team looks forward to continuing its dialogue and close engagement with Pakistan’s government on policies to ensure macroeconomic stability for the benefit of all of Pakistan’s citizens,” the IMF statement concluded.