Pakistan will roll back fuel subsidies as it can’t afford them, the country’s Finance Minister Miftah Ismail said after he held talks with the International Monetary Fund (IMF) in Washington for the revival of the $6 billion bailout package which remains stalled for over a year.

“They (IMF) have talked about removing the subsidy on fuel. I agree with them….We can't afford to do the subsidies that we're doing. So we're going to have to curtail this,” Ismail, who became the country’s finance minister this month, was quoted as saying by Dawn.

He said he held “good discussions” with the IMF. He also added that the government will withdraw the tax amnesty schemes.

Approved in 2019 by the IMF Board, the $6 billion bailout package saw little disbursement as Islamabad failed to undertake necessary reforms to improve its fiscal condition. In the first nine months of the Fiscal Year 22, the trade deficit has already crossed $35 billion and is all set to record its highest ever deficit this year, surpassing $37 billion which it recorded in FY 18.

Pakistan is looking for the release of the $1 billion from the IMF package, Ismail said earlier, while blaming the country’s former prime minister Imran Khan for stalling the IMF program. During his last days in power, Khan had announced huge subsidies on fuel and electricity, a move that scuttled almost a year of reform work of his own government to get the IMF program back on track.

Significantly, the IMF had also sought fiscal adjustment of close to PKR 1.3 trillion (roughly $6.9 billion).

For newly elected Prime Minister Shehbaz Sharif, putting back the country’s ailing economy on track is the topmost priority. A day after assuming office, Sharif had called a meeting of the country’s top economists and instructed them to initiate reforms.

The Sharif administration is also considering ordering the review of some mega projects which have remained stalled for months. Reports also suggested the government is in favor of ordering an audit of captive power plants for certain industries that continue to enjoy subsidized tariffs while giving little regard to the efficiency of production.

(SAM)