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Tuesday June 25, 2024

No subsidy without prior approval, IMF tells Pakistan

The federal government sought US intervention once again on Wednesday to convince the IMF for SLA

By Mehtab Haider
May 04, 2023
This file photo taken on January 26, 2022, shows the seal for the International Monetary Fund (IMF) in Washington, DC. — AFP
This file photo taken on January 26, 2022, shows the seal for the International Monetary Fund (IMF) in Washington, DC. — AFP

ISLAMABAD: The International Monetary Fund (IMF) has incorporated into the draft Memorandum of Economic and Financial Policies (MEFP) that Pakistan will not provide any kind of additional subsidy without prior approval of the Fund.

Meanwhile, the federal government sought US intervention once again on Wednesday to convince the IMF staff to move towards striking a staff-level agreement (SLA) as Islamabad had fulfilled all the major conditions given in the Fund’s prescriptions.

“Pakistan and the IMF have evolved broader consensus that Islamabad will not provide any additional subsidy without prior approval of the Fund staff during the remaining period of the ongoing Extended Fund Facility (EFF) programme,” top sources privy to the development confided to The News on Wednesday.

Thus, the lingering controversy over the proposed cross-fuel subsidy had now been resolved largely, which had proved one of the major stumbling blocks in the way of signing the SLA.

On another thorny issue of securing confirmation on the external financing gap of $5 billion by the end of June 2023, the sources said the Kingdom of Saudi Arabia (KSA) and United Arab Emirates (UAE) had extended confirmation to the IMF of over $2 billion and $1 billion, respectively. It was expected that the formal agreements with the KSA and UAE would be signed shortly. The Pakistani authorities are complaining that the IMF placed prior actions before signing the SLA, which was never done in the past. Now it’s a chicken-and-egg situation, as the IMF asks for confirmation from the commercial banks before signing the SLA, while the banks are asking for IMF’s board approval and revival of the Fund programme to re-finance $2 to $3 billion loans.

According to an official announcement, made by the Ministry of Finance on Wednesday, Andrew Schofer, Charge’d Affaires of the Embassy of United States, called on Federal Minister for Finance and Revenue Senator Mohammad Ishaq Dar at the Finance Division.

The minister also informed the charge’d affaires about the ongoing IMF programme and assured him that the government was committed to completing the programme.