IMF wants Pakistan to reverse Imran Khan's relief package

Islamabad [Pakistan], April 21 : Pakistan Finance Minister Miftah Ismail on Wednesday said that the International Monetary Fund (IMF) wants the country to revoke the subsidies extended by the Imran Khan government by increasing fuel prices and power tariffs, to revive its Extended Fund Facility (EFF), reported local media.
Noting that the fund had set a series of prior conditions involving steep fiscal adjustment close to Pakistani rupees 1.3 trillion, the finance minister said that the IMF wants fuel prices raised to breakeven and taxes restored, amnesty scheme discontinued for industries, circular debt reduced, power rates increased and fiscal savings ensured in order to completely reverse the February 28 relief package extended by the previous government, reported the Dawn newspaper.
However, Ismail said that the government has not made any commitment to the IMF yet, adding that Prime Minister Shehbaz Sharif has advised him to pass on the minimum possible burden to the people.
"We will not pass it on as suggested but something would have to be done because the IMF programme is inevitable," the media outlet quoted him as saying.
Notably, the previous government had a commitment to have a primary balance of PKR 25 billion which was now in deficit at PKR 1.3 trillion.
The minister stressed that the IMF's greater focus was on ending fuel subsidy, which is creating a fiscal hole while the power tariff could be delayed as it does not have a direct bearing on the budget. He also hinted at doing away with tax amnesty for industries at the outset.
Ismail said that the petrol price required a hike of PKR 21 per litre for breakeven followed by PKR 30 per litre petroleum levy and 17 per cent GST that would take its price to PKR 234 per litre. "This is not possible," he said.
The finance minister accused Imran Khan for a totally "ill-advised and illogical" package that was not based on the finance ministry's summary.
He added that Khan approved PKR 67 billion fuel subsidy for April which had no prior approval while PKR 96 billion subsidy was now estimated each for next two months as per litre subsidy on diesel had increased to PKR 51.52.
"Not only the government is paying these amounts out of the budget every month, but PKR 25-50 billion due in taxes was not coming. This, on an annual basis, translates into PKR 1.8 trillion - larger than the country's defence budget," the media outlet quoted him as saying.
"What you have done Khan Sahib to this country," he added.
Notably, the oil prices in Pakistan have become Hobson's choice for the government as no budgeting could possibly be done with an over PKR 150 billion subsidy on oil alone, however, raising the oil prices as per international market rates will invite a strong public reaction against the government.
According to sources, the capping of oil prices, amounting to a subsidy of 150 billion Pakistani rupees per month, by the Imran Khan government towards the end of its tenure has become a major concern for the present government that sees it as a trap to sabotage the Shehbaz Sharif-led administration, reported The News International.