IN yet another attempt to break the deadlock with the IMF for the revival of the stalled $6.5bn support programme, the government has ditched its much-hyped, politically motivated fuel subsidy plan for low-income segments of the population. Yet, the chances of an early resumption of the much-needed funding facility look quite slim despite the government’s U-turn on its proposal to charge affluent consumers a higher price to cross-subsidise petrol for low-income groups, which have been hit very hard by rising inflation, which soared to 36.4pc last month. Many had expressed their doubts over the viability of the scheme from the very start, even before the IMF had demanded its details from the fiscal authorities. The government gave its commitment to the lender days after Minister of State for Petroleum Musadik Malik said the administration aimed to address the IMF’s concerns before implementing its new fuel subsidy plan.
Although the Fund has pledged to “continue engagement with the Pakistan government on the loan despite the ramp-up in political tensions” after the arrest of Imran Khan triggered violence across the country, the lender doesn’t appear in a mood to relent on its condition for Islamabad to arrange significant additional financing to revive the programme that is crucial for Pakistan to resolve its acute balance-of-payments crisis. Pakistan says it cannot secure additional financing from other multilaterals before the IMF signs the agreement. Ishaq Dar recently approached some IMF executives for unlocking its dollars, but without success. Apparently, the IMF decision to delay the staff-level agreement seems to be driven by a growing trust deficit. The Fund is also worried about the viability of the programme post-budget as the elections approach. The ministerial statements of giving relief to voters ahead of the elections, and the announcement of half-cooked schemes like petrol subsidies, have only widened this mistrust. Unless the lack of trust is bridged, the chances of the IMF programme’s revival will remain bleak.
Published in Dawn, May 13th, 2023
