- The IMF says it will extend help to Pakistan only after an assessment by the World Bank and UNDP.
- The IMF calls on Pakistan to use its resources for its people.
- The IMF also says the subsidy is counter-productive.
The International Monetary Fund (IMF) said that it would be able to help Pakistan after it receives an assessment report from the World Bank and UNDP regarding economic devastation as a result of unprecedented flooding in the country. The Fund also called upon Pakistan to focus on using its resources for its people, instead of g
The IMF said it has been very supportive of Pakistan and that it has extended and increased its programme in size for the country.
The IMF said it may send a mission in November to Pakistan after the annual meetings as part of preparations for the next review. However, the Fund said it will wait for the assessment of the damages that the World Bank and UNDP are conducting at the moment.
“We are waiting for the assessment of the damages that World Bank and UNDP are conducting to see what are on one hand the repercussions on public finance and the impact on the economy and on the society,” IMF’s Director of the Middle East and Central Asia Department, Jihad Azour, said, addressing a press briefing in Washington on Thursday.
“We were saddened by the loss of human as well as also livelihood in Pakistan with the flood and we presented, and we reiterate our condolences for the people of Pakistan. The Fund has been very supportive to Pakistan over the last period. We have a program with Pakistan that has been extended and increased in size.”
Azour said the Fund has done this to help Pakistan deal with the confluence of shocks starting with the Covid crisis where it provided the country with additional flexibility.
“We had recently completed a review that provided Pakistan with $1.2 billion and hopefully we will be fielding a mission in November after the annual meetings to Pakistan in order to start with the authorities preparing for the next review,” he said.
However, he said the IMF is currently waiting for the assessment of the damages that the World Bank and UNDP are conducting to see what are the repercussions on public finance and the impact on the economy and on society.
The IMF’s director for the Middle East and Central Asia said the Fund would see how it could help Pakistan based on the assessment from the WB and UNDP. He said the Fund would update its numbers and based on its discussion with the authorities, it would also listen to them about their priorities.
“Subsidy that is targeted to support certain items has proved not to be very effective. I would say it has proved to be very regressive,” he said. “In our regional economic outlook we are again looking at this issue that is showing that this is not the best way to use the very limited fiscal space that exists.”
Because of this, the Fund encourages Pakistan and other countries to discontinue untargeted subsidies that are a waste of resources, he said. He also stressed that the IMF encourages countries to dedicate these resources to those who need them most.
The IMF director said it is very critical to reallocate resources for those who need them the most given the fact that challenges are mounting and the increase in prices is hurting. This is not part of IMF conditions, but it is needed to provide the right protection to those who need it during a time of high inflation, he said.
Decision to cut POL prices in line with IMF conditions?
The remarks of the IMF director came as Pakistan slashed the prices of petroleum products in the current fortnight starting November 1. The IMF official holds that giving subsidies on select items is counter-productive.
The newly appointed finance minister Ishaq Dar massively cut the price of petrol by Rs12.63 per litre, giving relief to the inflation-stricken people of the country.
Addressing his maiden press conference as the finance minister, Dar said that the decision to reduce the prices of petroleum products has been taken after consultation with Prime Minister Shehbaz Sharif.
Dar, who was sworn in as the finance minister on September 28, also claimed that he would bring the dollar value below Rs200.
“The actual value of the Pakistani rupee is less than 200 against the greenback and it will be brought down as it is currently undervalued,” he said during Geo News‘ programme “Capital Talk” on October 3.
He mentioned that the dollar value is strong internationally, but “we will bring it down below Rs200 soon.”
Dar’s decision to whittle down the POL prices sparked debate about whether the move is in line with the IMF deal. The former finance minister Miftah Ismail also termed the decision a ‘reckless’ move.
Amid the controversy, Ishaq Dar traveled to Washington to attend the IMF’s meetings, seeking to revise the macroeconomic framework.
“Pakistan’s Minister for Finance Ishaq Dar will participate in the upcoming annual meeting of the IMF/World Bank,” a top official of the finance ministry confirmed while talking to The News on Wednesday.
In an earlier statement, the IMF had said that policy commitments made by the Pakistani authorities as part of the seventh and eighth reviews under their support program continue to apply.