Finance Division rejects ‘misleading’ reporting on Pakistan’s IMF programme

The Finance Division on Tuesday rejected what it described as “misleading” reporting about Pakistan’s engagement with the International Monetary Fund (IMF), saying the programme is a whole-of-government initiative rather than a Finance Division-led exercise. The ministry issued the clarification in response to a report published by The Express Tribune on September 22, titled “Iqbal seeks role in IMF talks”, saying certain assertions regarding the Ministry of Finance, IMF engagement and the government’s economic stabilisation programme did not accurately reflect the institutional process. The Finance Division said the IMF’s Extended Fund (EF) and Resilience and Sustainability (RS) facilities cover reforms and commitments falling within the mandates of multiple federal and provincial institutions, including the Finance Division, Planning Commission/Ministry of Planning, Ministry of Energy, provincial governments, Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP). “Concerned ministries and institutions participate and lead technical discussions, including benchmark setting relating to their respective mandate, ” it said. The ministry also rejected the characterisation that the IMF programme is focused primarily on fiscal targets, saying the programme includes growth-enhancing structural reforms, social protection, governance, energy-sector efficiency, climate resilience and measures to reduce economic distortions. It said the latest IMF staff report specifically highlighted reforms aimed at supporting stronger growth while protecting vulnerable households. PDL not central to IMF programme The Finance Division also disputed the assertion that the petroleum development levy (PDL) is the “central point” of the IMF programme. It said the fiscal strategy was broader and included FBR revenue mobilisation, expansion of the tax base, provincial taxation and expenditure rationalisation. “PDL is one of the revenue instruments and describing it as centrepiece of programme materially overstates its role, ” the ministry said. However, the Finance Division clarified that while the IMF programme does not prescribe a single permanent headline PDL rate, published programme documents contain provisions concerning petroleum pricing and levies. These include alignment of domestic fuel prices with international prices through regular adjustments, while the Resilience and Sustainability Facility also includes a reform measure introducing a supplementary carbon levy through the PDL framework. The ministry said petroleum pricing policy therefore forms part of the agreed programme framework rather than being an independent fiscal strategy developed solely by the Finance Division. The Finance Division also rejected what it called an analytical error in directly linking the PDL to inflation, unemployment, poverty and low economic growth. It said Pakistan’s inflation and growth outcomes were influenced by multiple factors, including geopolitical developments, domestic and international commodity prices, exchange-rate movements, monetary conditions, fiscal imbalances, external financing constraints and global shocks. The ministry said fiscal stabilisation could not be separated from growth, arguing that restoring fiscal sustainability, rebuilding reserves and reducing refinancing risks were necessary conditions for durable private investment and economic growth. It referred to the IMF’s third-review documents, which recorded that fiscal consolidation had contributed to reducing macroeconomic imbalances and demand pressures, supporting disinflation and external-sector stabilisation through reserve accumulation and recovery in overall growth. Highlights social safeguards The ministry said fiscal consolidation under the programme had also included social safeguards, including floors and commitments for social protection. These included targeted cash transfers under the Benazir Income Support Programme (BISP) and inflation adjustments to unconditional cash-transfer benefits. The Finance Division also cited the government’s targeted fuel-subsidy programme as an example of a temporary intervention aimed at protecting vulnerable households while maintaining fiscal sustainability. It said sovereign debt was linked to fiscal imbalances and claimed that debt growth in the last financial year was limited to its lowest level in two decades. Agricultural taxation involves provinces On agriculture-related reforms, the Finance Division said agricultural income taxation was constitutionally and administratively a provincial responsibility and therefore required implementation by provincial governments. It said assessments of such reforms should distinguish between programme coordination by the Finance Division and the constitutional and administrative responsibilities of relevant governments and institutions. The ministry stressed that the Finance Division’s role in overall programme coordination and agreement on benchmarks with the IMF should be distinguished from the policymaking, legislative and implementation responsibilities of federal ministries and provincial governments. “The appropriate policy debate is therefore not ‘stabilisation versus growth’, but how to transition from stabilisation towards sustainable growth without any fiscal and external imbalances that necessitated reverting to IMF stabilisation programmes, as witnessed in the past, ” it said.

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