The International Monetary Fund (IMF) will question the government on the merits of relief package and incentives announced by Prime Minister Imran Khan during the upcoming 7th review of the Extended Fund Facility (EFF) programme.

This was confirmed by Esther Perez Ruiz, IMF Resident Representative in Pakistan, while responding to a query from Business Recorder.

The IMF official stated, “The authorities and the IMF will discuss during the upcoming 7th review of the EFF the merits of the recently-adopted relief package and other measures to promote macroeconomic stability amidst a challenging external environment.”

The IMF 7th review under the EFF programme is expected by the end of the current month, which would be followed by the Executive Board meeting in April 2022.

The government has found a specific fiscal space of Rs 250 billion which will be channelized to provide relief in energy prices, said Executive Director Sustainable Policy Institute (SDPI), Dr Abid Qaiyum Suleri.

Dr Suleri, who is also a member of the Prime Minister’s Economic Advisory Council and Convener of National Coordination Committee on Agriculture Transformation, took to twitter and stated that Federal Minister for Finance and Revenue, Shaukat Tarin, and the Macro-Economic Advisory Group have been working on different options to provide relief to consumers, and Monday's announcement of economic relief measures was not “a knee-jerk reaction” to any particular event.

Dr Suleri stated that Rs 1.5 billion worth of High-Speed Diesel (HSD) and Motor Spirit (MS) petrol is consumed per month. He clarified that the flat Rs10 per liter reduction in petrol and diesel prices translates into fiscal relief of Rs15 billion per month for the nation.

Regarding revision in electricity prices, Suleri said the government’s commitment to decrease electricity prices at the rate of Rs5 per unit equates to a monthly impact of Rs17 billion.

He pointed out that the four-month subsidy (until next year’s budget) on petrol and diesel roughly equals Rs128 billion. Further, for the exchange rate, a cushion for petroleum levy on associated products and the price of crude oil translates to Rs93 billion.

Prime Minister Imran Khan, on Monday announced Rs10 per liter reduction in the price of petrol and diesel. He also announced a reduction in the cost of power by Rs5 per unit, an increment to Ehsaas beneficiaries, as well as provision of interest-free loans to the youth and farmers under the government’s flagship Kamyab Jawan Programme.

Renowned economist Kaiser Bengali told Business Recorder said that the Prime Minister Incentives Package was a political move amid rising pressure from the opposition parties, adding that the IMF would have some concerns at his relief package. Bengali further said that a reduction in prices of two commodities would not help ease inflationary pressure.

The story was originally published in Business Recorder on March 2, 2022.