The International Monetary Fund (IMF) confirmed Saudi Arabia’s confirmation of $2 billion in additional deposits, which reignited Pakistan’s negotiations with the IMF for the release of $1.1 billion from a $6.5 billion bailout package agreed in 2019.
Due to promises of additional funding from friendly countries, the agreement has been delayed. To release the funds,
The government of Pakistan reduced subsidies, lifted a fictitious exchange rate ceiling, increased taxes, and increased fuel prices.
However, the Ministry of Petroleum’s announcement of an unforeseen cross-fuel subsidy for owners of motorcycles and cars up to 800cc remains a roadblock to the staff-level agreement (SLA) with the IMF.
The transparency and execution of the plan have drawn criticism from the IMF.
Sources claim that the lender informed the Pakistani government of the development, and the staff of the Fund is pleased with the confirmation.
During the upcoming trip to the kingdom by Prime Minister Shehbaz Sharif, the Saudi government is anticipated to make a formal announcement. Ishaq Dar, the finance minister of Pakistan, is anticipated to stop in the UAE on his way to the US in order to hold discussions about the release of funds.
The UAE’s confirmation of a further $1 billion deposit could open the door for the SLA to be signed with the IMF.
The proposed cross-fuel subsidy has not yet been withdrawn by the Ministry of Petroleum after consulting with the Prime Minister’s Office. The subsidy must be abandoned at this point because it cannot be implemented in a half-baked manner.
Similar plans were put forth in the past during the tenure of former finance minister Shaukat Tarin and even when Miftah Ismail oversaw the Ministry of Finance during the PDM-led administration.
On the eve of the previous budget, Miftah Ismail had allotted Rs48 billion for Sasta Petrol, but it was unable to be carried out due to a poor design. The IMF used the disclosure of a shoddy cross-fuel subsidy as justification to put off the signing of the SLA.
Finally, the IMF’s confirmation of Saudi Arabia’s $2 billion in additional deposits has given Pakistan new hope that it will receive funds from the IMF soon.
To clear the way for the SLA to be signed with the IMF, however, the government must address the issue of the cross-fuel subsidy.
