How would you fund $1.5B subsidy package? IMF asks Pakistan
The International Monetary Pay (IMF) has asked Pakistan to clarify how it plans to fund a $1.5 billion subsidy package promised by Prime Minister Imran Khan. "There are no concerns. We've told them where the money would come from," Reuters quoted the country's Finance Minister Shaukat Tarin as saying. The IMF had sought specifics on the resources used for fuel and energy subsidies.
Why does this story matter?
Imran Khan is currently facing a no-confidence vote from opposition parties. He had announced a reduction in fuel and energy prices amid a significant surge in the global oil market. The country had to implement fiscal tightening measures in order to pass its most recent IMF review. Earlier, it was delayed due to the government's inability to complete the preceding action.
IMF review of state-owned enterprises
The IMF has begun the sixth assessment of Pakistan's $6 billion bailout plan agreed upon in 2019. The world body has said that it should be shown the dividend agreements of State-Owned Enterprises (SOEs), as well as specifics of the spare funds that the central government will receive from provinces. Tarin said that he'll meet the lender on Tuesday.
Finance minister reveals the revenue data
"We have done our homework," Tarin said. Notably, Tarin had earlier said revenue would hit 6.1 trillion Pakistani rupees ($34.2 billion), compared to a target of 5.8 trillion rupees. Some of the subsidy money would also come from above-target revenues, he had said previously.
Crucial executive meeting of IMF
On February 2, the IMF's Executive Board met in Washington DC to evaluate Pakistan's request to complete the sixth review and release a $1 billion tranche under the Extended Fund Facility (EFF). With the end of this review, Pakistan's total disbursements under the agreement amounted to SDR 2,144 million (about $3 billion), or 106 percent of the country's quota.
IMF agreement for fund facility
Pakistan and the IMF established a staff-level agreement on economic measures for a three-year Extended Fund Facility (EFF) in July 2019. Pakistan was to receive around $6 billion over a 39-month period under the arrangement. The IMF makes the loan facilities available to a nation that is experiencing substantial medium-term balance of payments concerns due to various reasons.
IMF review postponed twice in the past
The sixth review was originally set for January 12, 2022, and then again on January 28, but it was postponed twice due to Pakistan's request for extra time to execute IMF terms.
