Finance Minister Miftah Ismail promised on Friday that the International Monetary Fund would push for structural reforms to boost the economy in crisis as the International Monetary Fund agreed to a recommendation to cut fuel subsidies and end corporate tax exemptions.
In 2019, the IMF approved a three-year loan of $6 billion to Pakistan, but spending was delayed by concerns about the pace of reforms.
Ismail, who took office this month after the government led by Imran Khan lost a vote of no confidence, said he had “good discussions” by visiting the IMF during the Washington-based lender’s annual spring meeting.
“They talked about getting rid of fuel subsidies. I agree with them,” said former IMF economist Ismail before the Atlantic Council.
“We can’t afford the subsidies we’re doing. So we have to reduce it.”
Earlier, the finance minister Serb He was expecting an early agreement with the IMF on a seventh review of a bailout package for Pakistan.
He said at a meeting in Washington that he re-emphasized the current government’s commitment to the reform process.
The meeting with the IMF Directors was also attended by the Secretary of State Dr. Ayesha Ghous Pasha, the Finance Minister and the Governor of the Central Bank. The Minister and his team also met with Jihad Azour, Head of the Middle East and Central Asia Department of the IMF.
The coalition government, led by Imran, has sternly criticized the country’s failure to control oil prices at first and later “derailed” the IMF program through fuel subsidies, but has not yet withdrew the move with the prime minister. Shehbaz Sharif last week rejected a proposal to raise gasoline prices from the Oil and Gas Regulatory Authority (Ogra).
Ismail said former Prime Minister Imran Khan “traps” his successors with massive subsidies for fuel and electricity and tax amnesty for businesses to avoid ouster.
“He has given pardons to companies that have built factories so that businesses don’t have to pay taxes,” Ismail told reporters at an event hosted by the embassy in Washington.
But Ismail added that some targeted subsidies for the country’s poorest should be maintained amid skyrocketing international prices.
Prime Minister Shehbaz Sharif has pledged to revitalize the stagnant economy, which will be a major issue in next year’s general elections.
Pakistan has repeatedly sought international assistance and suffers from a chronically weak tax base.
Ismail said the country needs to move to a new economic model by removing barriers and facilitating exports to the world.
“We have a country with elite benefits, so almost every subsidy you can tell actually goes to the wealthiest people,” he said.
Ismail said his immediate goal is to start job creation and contain the complex target of double-digit inflation by lifting fuel subsidies.
He denies that Pakistan is at risk of default, with $10 billion in foreign exchange reserves and large debts to friendly countries such as China, Saudi Arabia and the UAE.
Shehbaz is less than a year away from the general election. Observers are wondering if Imran’s ouster would backfire. Because his government has inherited an economic crisis that will take time to overcome.
But Ismail said, “There was never a bad time to do the right thing.”
“If what we say is true and we are actually more capable, we could make a difference in a few months. Otherwise we will be kicked out by people. it’s okay.”