The International Monetary Fund (IMF) said on Thursday that it would send a team to Pakistan early next month to start the process for the next review of their current programme.
At a media briefing, journalists asked IMF’s Director of the Middle East and Central Asia Jihad Azour if the Fund would reschedule Pakistan’s debt and provide financial relief to the country to help it deal with the consequences of this year’s unprecedented floods.
They also wanted to know if the IMF was upset with the government’s decision to reduce fuel prices and if Pakistan could meet the Fund’s conditionalities in the current situation.
“The Fund has been very supportive of Pakistan. We have a programme with Pakistan that has been extended and increased in size. This is to help Pakistan deal with a confluence of shocks, starting with the Covid crisis where we provided additional flexibility,” the IMF official responded.
“We accelerated some of our disbursements to help Pakistan deal with recent shocks, such as the increase in prices of foods and commodities,” he said,
“Hopefully, we will be fielding a mission in November, after the annual meetings, to Pakistan to start” the process for the next review, Mr Azour said.
A World Bank and UNDP team, he said, was currently assessing the flood damages and the IMF was waiting for the report to see what’re the repercussions on public finance, and the impact on the economy and the society.
“Based on this assessment, we will update our data and we will also (engage) with the authorities to see what their priorities are and how the Fund can help,” he said.
Mr Azour also urged Pakistan not to give ‘untargeted subsidies’ to consumers as such interventions have always been counterproductive.
Responding to a question about providing subsidies to the people, he said: “As in other parts of the world, a 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.”
In its regional economic outlook, the IMF was again looking at this issue and “it shows that this is not the best way to use a very limited fiscal space that exists,” he said.
“Therefore, we are encouraging Pakistan, as well as other countries, to move away from an untargeted subsidy that’s a waste of resources. And to dedicate those resources to those who need it.”
Mr Azour pointed out that the South and Central Asian region spends two percent of its GDP on social protection, and in certain cases twice as much.
“It is very important to use this when challenges are mounting, where increase in prices is hurting, to reallocate the resources for those who need it the most,” he said.
The IMF official, however, clarified that this observation was not part of the IMF conditionalities. “This is part of what’s needed to provide the right protection to those who need it at a time when the 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, counselor on international affairs to the US Secretary Treasury.
The meeting took place at the Pakistan Embassy and was also attended by Pakistan’s Ambassador Masood Khan.
Later, the finance minister also met IMF Deputy Managing Director Antoinette Sayeh and World Bank Vice President Martin Raiser.
On Wednesday, Dar was intercepted by PTI hecklers when he landed at the Dulles International Airport. A local PML-N leader, Mani Butt, could be seen responding in obnoxious language to the hecklers in videos being shared on social media.