ISLAMABAD: A high-powered Pakistan delegation is scheduled to visit Washington this week for participation in the upcoming annual spring meeting of the Breton Wood Institutions (BWIs) such as the IMF/ World Bank, with chances of fresh contacts with the International Monetary Fund on the sidelines of the meeting.
However, the revival of the IMF programme still remains a far cry in the wake of the existing widening gap on account of twin deficits, including the budget deficit and current account deficit for the current fiscal year.
“The Ministry of Finance would have a technical meeting with the IMF on coming Friday, but there is no scheduled virtual meeting for review talks at this point in time,” one top government official confirmed to The News here Sunday night. The probable PM’s Adviser on Finance Miftah Ismail told The News that Pakistan’s delegation was scheduled to participate in the upcoming annual spring meeting of BWIs this week. The official delegation will consist of finance secretary, State Bank of Pakistan (SBP) governor and additional secretary external finance. It’s also a possibility that the name of Miftah Ismail might be excluded from the ECL and he might join the official delegation to represent Pakistan at the upcoming annual meeting of the IMF/WB.
Secretary Finance Hamid Yaqoob told The News, “Discussions with the IMF are never halted. There was an interregnum because there was no finance minister. We have been sharing data with the IMF. Now with the spring meeting next week, our discussions have become more regular and focused on completing the 7th Review.” However, he did not mention any specific time-frame for completion of 7th Review under the $6 billion Extended Fund Facility (EFF).
In the wake of yawning twin deficits, the revival of IMF programme will be highly difficult. The government decision to keep petroleum prices unchanged also sent out wrong signals to the IMF. Without changing approach and doing away with the relief mechanism, the revival of IMF programme will remain impossible.
When contacted, renowned economist Yousuf Nazar, who is also the author of a book on Pakistan’s economy, said that the POL [petrol, oil and lubricants] prices should be adjusted upward in a staggered or gradual manner. He proposed to adopt a comprehensive approach whereby the unjustified subsidies for big industrialists such as for fertilizer, sugar and other sectors to the tune of Rs1,000 billion per annum should be abolished and diverted towards financing targeted fuel subsidies.
He also proposed that fixation of pricing mechanism of POL products should be made transparent and a parliamentary committee should be formed for allowing public hearing to ascertain the facts and then place price fixation mechanism in a transparent manner.
He suggested that Russian oil should be purchased without violating international sanctions as being done by India. He said that there was a mechanism available where payment system through third country could be placed and Pakistan could import cheap oil with the help of such mechanism from Russia.
He also proposed that the POL import on deferred payment from China and other friendly countries could also be explored under the comprehensive strategy to combat with arising challenging situation faced by Pakistan’s economy.
Dr Khaqan Najeeb, former advisor at the Ministry of Finance, told this reporter that subsidised energy pricing policies are a heavy burden on the exchequer and thus unsustainable. On the other hand, higher prices driven by the global commodity super cycle and the effect of rupee adjustment are hard to pass to the consumers already reeling under inflationary pressures.
He said there was a dire need to show prudence over populism. The government has just come in and it is hoped that in future, after taking stock of the situation, the pricing decision will be reconsidered. A possible way is to pass the prices of petroleum products gradually to the extent of covering the full cost of the products. The PDL and GST could be left at negligible levels.
Dr Khaqan explained that increasing breadth and quantum of targeted subsidy is now possible because of new databases developed by the government to cover a larger populace. Other options like fuel cards linked to income support databases especially for motorcycle users for up to a certain amount at discounted prices and diesel fuel cards for public transporters and agriculturists using tube-wells and tractors can be started. Targeted subsidies will help the government in taking the tough decision of eliminating general subsidies in the economy from which the rich and less privileged are all benefiting, he concluded.