- IMF is encouraging Pakistan to move from an untargeted subsidy that is a waste of resources, says Fund's official
The International Monetary Fund (IMF) would send its mission to Pakistan in November after the annual meetings in order to start preparing for the next review with the authorities.
The development was announced by IMF’s Director of the Middle East and Central Asia Jihad Azour during a media briefing on Thursday night.
“We have a program with Pakistan that has been extended and increased in size. This is to help Pakistan deal with the confluence of shocks starting with the Covid crisis where we provided additional flexibility.
“We had recently completed a review that provided Pakistan with $1.2 billion and hopefully we will be fielding a mission in November after the annual meetings to Pakistan in order to start with the authorities preparing for the next review,” the IMF official said.
Azour said that the Fund is waiting for the assessment of the damages that the World Bank and UNDP are conducting “in order to see what are on one hand the repercussions on public finance and the impact on the economy and on the society”.
Responding to a question, Azour urged Pakistan not to give ‘untargeted subsidies’ to consumers as it is a "waste of resources".
“On the issue of subsidy, as in other parts of the world, 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,” he said.
“And in our regional economic outlook we are again looking at this issue that is showing that this is not the best way to use the very limited fiscal space that exists.
“Therefore, we are encouraging Pakistan as well as also other countries to move from an untargeted subsidy that is a waste of resources and to dedicate those resources to those who need it,” he added.
Giving an example, Azour said that the "region spends on social protection 2% of GDP and in certain cases what countries are spending on subsidies could be the double of that.
"Therefore, it’s very important to use this moment where challenges are mounting, where increase in prices is hurting, to reallocate the resources for those who need it most," he said.
However, the IMF official elaborated that "this is something that it’s not, I would say, part of the IMF conditionalities, this is part of what is needed in order to provide the right protection for those who need it at the time where inflation is very high".
It is pertinent to mention, Federal Minister for Finance and Revenue Ishaq Dar held key meetings with the top officials of the International Monetary Fund (IMF), World Bank and various financial institutions.
Dar is leading Pakistan’s delegation in the IMF / World Bank’s 2022 Annual meetings being held in Washington DC.