The International Monetary Fund (IMF) on Thursday hailed “considerable progress” made by Pakistan, following talks over new economic aid, but urged the government to put in place “concrete policy actions” to achieve program objectives. “The mission had very constructive discussions with the Pakistani authorities,” said Nathan Porter, who led the IMF mission with the Pakistani authorities in Doha (Qatar), both in person and virtually, in a press release. May 18 to 25.
He said that “considerable progress was made during the mission, notably on the need to continue to combat high inflation and high budget and current account deficits, while ensuring adequate protection for the most vulnerable”. “In this regard, the new key rate hike implemented on May 23 was a welcome step,” he added. On Monday, the Pakistani central bank raised its rates by one and a half percentage points, to 13.75%, noting in particular that inflation rose in April to 13.4% over one year, the highest in two years. .
Nathan Porter, on the other hand, regretted the situation on the budgetary level, with “deviations from the policies agreed at the last review, partly reflecting the fuel and electricity subsidies announced by the authorities in February”. The amount of Pakistani subsidies to the energy sector, gasoline and electricity, was in fact the main point of friction between the IMF and the Pakistani government.
“The team underscored the urgency of concrete policy actions…to achieve program goals,” Porter added. Six billion dollars in IMF aid, signed by former Prime Minister Imran Khan in 2019, was never fully implemented as the government in Islamabad backed away from its promise to cut some of these subsidies and increase tax revenue.
Islamabad has received half of this aid package so far, with the remainder due, normally, later this year. Pakistani officials are seeking an extension of this program until June 2023, as well as the disbursement of a next installment of $1 billion.
