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IMF asks Pakistan to show how it would fund $1.5 billion subsidy package

Tarin says Fund expressed reservations over govt’s recent relief in POL products, electricity tariff

Owing to the robust growth of the country’s large scale manufacturing, agriculture and exports, Finance Minister Shaukat Tarin Sunday expressed the hope that the gross domestic product (GDP) growth would exceed the five per cent mark against the set target of 4.8 per cent for the fiscal year 2021-22.

“The welcome news is that the LSM has grown by 8.2% in January against the same month of last year and 4.2% against December 2021,” he said while addressing a press conference in Islamabad.

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He said the LSM growth was slowed down in August and September last year; however, the good news was that it had come again on a high growth level.

“Our economic growth momentum has picked up again as our all agriculture crops are growing at 6 to 12 per cent, and exports and services sectors are also growing at a high pace,” he said. Tarin said no doubt there were some headwinds like inflation and current account deficit, but the growth was sustainable and robust.

He said to curtail inflation and pass on the minimum impact of international inflation pressure to the masses, the government had taken several measures including significant relief in prices of petroleum products and electricity.

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The minister highlighted that due to such measures, the Sensitive Price Index (SPI) based weekly inflation had reduced by 1.15 per cent in a single week.

Concerning the recent world happiness index issued by a United Nations body, the minister said Pakistan’s happiness index had improved by seven points in one year; however, that of India had declined by three points. He said the elements on which the index was based included perception of corruption, social support, freedom to make choices, GDP per capita, life expectancy, and generosity.

In Asia, he said Pakistan was among the top 15 happiest countries.

The finance minister added that the current account posted a high deficit for a few months, but now due to the government’s measures to curtail imports and increase exports, the deficit shrank significantly from over $2 billion in January to a mere $545 million in February.

“Our reserves with the central bank were almost $16.6 billion, so there had not been any hustle and bustle in the reserves as in the past when the reserves started depleting fast after high current account deficit.,” he said. Replying to a question with respect to the ongoing talks with the International Monetary Fund (IMF) to release the next tranche of the programme, the minister said the IMF had expressed reservations over the Pakistan government’s recent relief in petroleum products and electricity. However, he said, “We have satisfied them by showing how we will manage the fiscal space.”

Tarin acknowledged that the IMF had asked the government to explain how it would fund a $1.5 billion subsidy package announced by Prime Minister Imran Khan, adding that the Fund was subsequently provided with the details.

“This is not a big issue, as we have made full homework and my final talk with the IMF would be held on Tuesday,” he said, adding that the IMF should have no reason to stop the next tranche.

Responding to another question regarding the Pakistan Muslim League-Nawaz leader Miftah Ismail’s press conference the previous day, the minister said, the government was not issuing the Euro bond at this time due to the high-interest rate. “As soon as the international markets settle down and the rates become normal, we will issue the bonds.”

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