ISLAMABAD, Sep 22 (APP):The Ministry of Finance on Tuesday strongly rejected a report appearing in a section of media, clarifying that Pakistan’s program with the International Monetary Fund (IMF) was a whole-of-government initiative and not a Finance Division program. It said various federal and provincial institutions were responsible for reforms and commitments falling within their respective mandates. "IMF program is a whole-of-government program, not a Finance Division program," said a …
Finance Ministry clarifies misleading report on Pakistan’s IMF program
ISLAMABAD, Sep 22 (APP):The Ministry of Finance on Tuesday strongly rejected a report appearing in a section of media, clarifying that Pakistan’s program with the International Monetary Fund (IMF) was a whole-of-government initiative and not a Finance Division program.
It said various federal and provincial institutions were responsible for reforms and commitments falling within their respective mandates. “IMF program is a whole-of-government program, not a Finance Division program,” said a news release.
In a statement issued in response to a news report published in The Express Tribune on September 22, titled “Iqbal seeks role in IMF talks,” the ministry said it contained certain assertions and interpretations regarding the Ministry of Finance, Pakistan’s engagement with the IMF, and the government’s economic stabilization program that were misleading and not accurately reflect the facts or the institutional process.
The characterization that the Ministry of Finance has maintained “tight control” over program design and negotiations does not accurately reflect the institutional arrangements underlying Pakistan’s IMF program.
The ministry said the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) programs encompassed reforms and commitments falling within the mandates of multiple federal and provincial institutions, including Finance Division, Planning Commission/ Ministry of Planning, Ministry of Energy, provincial governments, Federal Board of Revenue (FBR), State Bank of Pakistan (SBP) and other relevant stakeholders.
“Concerned ministries and institutions participate and lead technical discussions, including benchmarks setting relating to their respective mandate,” it added.
The ministry said the IMF program was not confined to fiscal targets or macroeconomic numbers, adding that the program also covered growth-enhancing structural reforms, social protection, governance, energy-sector efficiency, climate resilience and reduction of economic distortions
The latest IMF staff report specifically stated that policy discussions focused on accelerating reforms to support stronger growth, while protecting vulnerable households.
Regarding the Petroleum Development Levy (PDL), the ministry said describing it as the “central point” of the IMF program is misleading. The program fiscal strategy is substantially broader and revolves around FBR revenue mobilization, expansion of tax base, provincial taxation, expenditure rationalization.
For FY 27, the program emphasised additional revenue mobilisation and strengthening FBR performance, while PDL remained one of several revenue instruments, it added.
The ministry said that while the IMF program did not prescribe a single permanent headline PDL rate, its published documents contained measures relating to petroleum pricing and levies, including alignment of domestic fuel prices with international prices through regular adjustments.
It added that the RSF also included a reform measure for introducing a supplementary carbon levy through the PDL framework.
Therefore, petroleum pricing policy formed part of the agreed program framework rather than being a fiscal strategy developed solely by the Finance Division, it said.
The ministry also said linking PDL directly to inflation, unemployment, poverty and low growth is analytically incorrect ND attributes broad macroeconomic outcome to a single fiscal instrument.
Pakistan’s inflation and growth outcomes reflected multiple factors, importantly prevailing geo-political situation along with domestic and international commodity prices, exchange-rate movements, monetary conditions, fiscal imbalances, external financing constraints and global shocks.
It said fiscal stabilization was necessary for sustainable private investment and economic growth, noting that Pakistan had entered the program with limited fiscal and external buffers and significant financing requirements.
“Restoring fiscal sustainability, rebuilding reserves and reducing refinancing risks are necessary conditions for durable private investment and growth,” the ministry said.
The IMF’s third-review documents record that fiscal consolidation contributed to reducing macroeconomic imbalances and demand pressures, supported disinflation, and external-sector stabilization through reserve build-up and recovery in overall growth numbers.
The ministry also said the Finance Division has not pursued fiscal consolidation without social safeguards, and supported the program to incorporates explicit floors and commitments for social protection, i.e., BISP targeted cash-transfer spending, inflation adjustment of unconditional cash-transfer benefits etc.
It said the recently introduced targeted fuel subsidy program was another measure aimed at protecting vulnerable households through targeted, temporary and fiscally sustainable support rather than broad-based subsidies that could create significant fiscal liabilities.
Sovereign debt is contingent on fiscal imbalance, and in last financial year, debt growth has been limited to lowest levels in two decades. On agriculture-related commitments, the Finance Division said these were not exclusively its responsibility.
Agricultural income taxation was constitutionally and administratively a provincial responsibility, with implementation involving provincial governments, it added.
“Any assessment of these reforms should therefore distinguish between program coordination by Finance Division and constitutional/administrative responsibilities of the relevant governments and institutions,” it added.
Lastly, a clear distinction needed to be maintained between Finance Division;s responsibility for overall pragram coordination, and agreement on benchmarks with IMF leading to policy-making legislative and implementation responsibilities of respective federal ministries and provincial governments.
“The appropriate policy debate is therefore not stabilization versus growth, but how to transition from stabilization towards sustainable growth without any fiscal and external imbalances that necessitated reverting to IMF stabilization programs, as witnessed in the past, it maintained.
