• Official says disbursements to Islamabad accelerated in wake of floods
• Warns against the use of ‘untargeted subsidies’ to counteract inflation
• Dar meets with US, IMF and World Bank officials; Interrupted by PTI activists at the airport upon his arrival.
WASHINGTON: The International Monetary Fund (IMF) said Thursday that it would send a team to Pakistan early next month to start the process of the next review of its current program.
At a press conference, IMF Middle East and Central Asia Director Jihad Azour was asked by journalists if the Fund would reschedule Pakistan’s debt and provide financial relief to the country to help it deal with the consequences of unprecedented flooding in this year.
They also wanted to know if the IMF was upset with the government’s decision to cut fuel prices and if Pakistan could meet the Fund’s conditions in the current situation.
“The Fund has been a great support to Pakistan. We have a program with Pakistan that has been expanded and increased in size. This is to help Pakistan deal with a confluence of shocks, starting with the Covid crisis where we provide additional flexibility,” the IMF official replied.
Read: IMF projections for FY23 for Pakistan do not take into account the impact of flooding
“We are speeding up some of our disbursements to help Pakistan cope with recent shocks such as rising food and commodity prices,” he said.
“Hopefully, we will be sending a mission in November, after the annual meetings, to Pakistan to start” the process for the next review, Azour said.
A team from the World Bank and UNDP, he said, was currently assessing the flood damage and the IMF was waiting for the report to see what the repercussions are on public finances and the impact on the economy and society.
“Based on this assessment, we will update our data and also (engage) with the authorities to see what their priorities are and how the Fund can help,” he said.
Warning Against Subsidies
Mr. Azour also urged Pakistan not to provide “non-targeted subsidies” to consumers, as such interventions have always been counterproductive.
Responding to a question about giving subsidies to people, he said: “As in other parts of the world, a subsidy that is meant to support certain items has proven not to be very effective. I would say it has turned out to be very regressive.”
In its regional economic outlook, the IMF was again looking at this issue and “shows that this is not the best way to use the very limited fiscal space that exists,” he said.
“Therefore, we are encouraging Pakistan, as well as other countries, to move away from a non-targeted subsidy that is a waste of resources. And dedicate those resources to those who need them.”
Read: Pakistan’s policy commitments continue to be implemented: IMF
Mr. Azour noted that the South and Central Asia region spends two per cent of its GDP on social protection, and in some cases twice as much.
“It’s very important to use this when challenges are piling up, where rising prices hurt, to reallocate resources to those who need them most,” he said.
The IMF official, however, clarified that this observation was not part of the IMF’s conditionalities. “This is part of what is needed to provide adequate protection to those who need it at a time when inflation is very high,” he said.
Finance Minister Ishaq Dar also began his official engagements in Washington on Thursday with a meeting with David Lipton, adviser on international affairs to the US Treasury Secretary.
The meeting took place at the Embassy of Pakistan and was also attended by the Ambassador of Pakistan, Masood Khan.
Later, the finance minister also met with IMF Deputy Managing Director Antoinette Sayeh and World Bank Vice President Martin Raiser.
On Wednesday, Mr. Dar was intercepted by those interrupted by PTI when he landed at Dulles International Airport. A local PML-N leader, Mani Butt, could be seen responding to hecklers in videos shared on social media.
Posted in Alba, October 14, 2022