IMF’s suggestion to decrease energy and fuel subsidies and finish the business tax amnesty system was accepted by Finance Minister Miftah Ismail on Friday. As a part of his economic stimulus plan, he also promised to implement structural changes to help the struggling economy.
The former PM Imran Khan made the relief package announcement on February 28th, 2022; government officials say they will provide approximately Rs. 21 per liter subsidization on gasoline, Rs. 51.52 per liter subsidization on diesel, and Rs. 5 per unit subsidization on electricity. The government is currently financing all of these subsidies with its own money.
If the subsidies in the energy sector are maintained, the government will suffer daily losses of Rs 2.5 billion and weekly losses of Rs 36 billion.
“Fuel subsidies are being discussed for removal. Miftah, speaking at the Atlantic Council, agreed with them.
“We can’t afford to pay for these subsidies. To avoid this, we must limit this,” he stated. More money has been given away as subsidies than is needed to keep the civil government running. Miftah did add that some targeted contributions should be kept for Pakistan’s poorest in the face of skyrocketing global prices.
By removing obstacles and promoting exports, Pakistan, the fifth-most populous country globally, can move to a new economic model, Ismail said.
“We have such an elite-benefiting country that almost every subsidy you can speak of actually goes to the richest people,” he said.
Imran Khan, he said, set a “trap” for his successors by offering heavy subsidies on fuel and electricity, as well as a tax amnesty program for businesses, to avoid being ousted as prime minister. He said these measures were intended to thwart the IMF loan’s disbursement.
A tax amnesty for businesses setting up factories was granted by Khan, according to Ismail, who spoke to reporters at an event organized by Pakistan’s embassy.
As a first step, Miftah said he wanted to rein in double-digit inflation and get the economy moving again.
Pakistan Tehreek-e-Insaf (PTI) has derailed the IMF program, Miftah said earlier this week, as he reaffirmed the government’s commitment to getting the program back on track to revive the country’s economy.
He said the govt would do whatever it took to get the program back on track. However, to reduce public sector development spending, he suggested that the government implement additional budgetary controls.
“The program will be returned as soon as possible,” said the team. If the government has to reduce its spending, “it will do so,” he said, adding that no additional burden will be placed on the people.
According to Miftah, who continued to blast Imran Khan as former prime minister, the IMF program had been derailed by Imran Khan and was now seriously off course. So that leaves us with convincing the International Monetary Fund (IMF). ACCORDING TO THE FINANCE SECRETARY, THE MINISTER SAID the IMF program was “5,300% off-track”.
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