Was IMF approval taken before launching the massive subsidy plan?

Conversations with members of the Prime Minister’s Economic Advisory Council (EAC) suggest the IMF may not have been consulted before the Rs250 billion subsidy plan was announced in a live televised address by Imran Khan.

When reached for the comment, the fund’s resident representative in Islamabad – Esther Perez Ruiz – would only say “the authorities and the IMF will discuss during the upcoming 7^th review of the EFF the merits of the recently adopted relief package and other measures to promote macroeconomic stability amidst a challenging external environment.”

Members of the EAC, when reached for comment by Profit, declined to speak for attribution, but two of them said the IMF has not been consulted. Another one said he did not know whether the fund was consulted, but added: “I would be very surprised if Shaukat Tarin has not passed this by the fund.”

When reached for comment, Finance Ministry spokesperson Muzzamil Aslam said “it is important to inform the IMF about the packages or incentives that affect the budget statistics. The finance minister has informed the IMF on Monday in this regard.”

An IMF team is scheduled to arrive in Pakistan this week for a two day visit as part of the 7^th review of the Extended Fund Facility that was restarted only a few weeks ago after prolonged wrangling between the government and IMF staff over its terms and conditions.

Profit has learned that the macroeconomic targets were all agreed to as far back as September of 2021 and the wrangling revolved mostly around the State Bank autonomy bill. In the end the government had to pass the bill in the form required by the IMF.

On a television appearance late on Monday night, finance minister Shaukat Tarin was asked specifically whether the fund had been taken into the loop before announcing the measures. His response was brief. “We make our decisions after getting the fund’s advice” he said, without getting any more specific. The anchor did not press the question in search of a more specific response either.

“The fund was not consulted” one EAC member told Profit. “Tarin was asked at the EAC specifically whether he has passed this by them [the IMF], and he told us he will handle the fund, that’s all.”

The same member also confirmed that there were objections from the EAC members. “We had been working on a relief package for almost two months” he said. “But our design was targeted, to use the channels of the Ehsaas program to transfer relief to those most in need. The present shape of the package came to us on the day the PM was in Moscow. There were objections about the lack of targeting and questions about the financing plan and the impact it will have on the fund program, and how open ended the commitment was going to be” he continued. “But in the end we were told this has to happen.”

These members tell Profit that the present shape of the package was worked out at the Prime Minister’s Office. “This came from the PMO” one of them said. “It did not originate from us or at Q block”.

Many members of the EAC remain unconvinced by the financing plan behind the package. In his televised interview, the finance minister provided a sketchy outline of where the resources will come from to pay for the plan’s commitments. “The financing plan is very sketchy, it has not been worked out in much detail” one EAC member tells Profit. For example, the Prime Minister announced that petrol and diesel prices will be frozen till the announcement of the budget, after the Rs10 reduction that was notified last night. “But what if oil reaches $110 by then? What if it rises to $120? Or $130?” one EAC member said. “What is the size of the bill the government will have to bear under various scenarios for such a prolonged commitment? They had done some numbers on this, and the amounts involved were very large” one member tells Profit.