Pakistan announces $64 million food subsidy amid IMF review

ISLAMABAD/KARACHI: The Pakistani government on Tuesday announced a Rs10 billion ($64.8 million) subsidy on five essential food items to overcome crippling inflation amid reported pressure from the International Monetary Fund (IMF) to keep energy prices market-driven.
The country’s consumer price inflation rose to 14.56 percent in January, the highest in nine years.
A recent shortage of staples such as wheat flour and sugar – and their price hikes – has fueled public protests and criticism of the government, prompting Prime Minister Imran Khan to take stock of the situation and introduce measures to bring down the prices of essential food products.
“We will be providing 2 billion rupees per month subsidy on five essential food items through Utility Stores Corporation to keep their prices stable in the market,” Dr. Firdous Ashiq Awan who advises Prime Minister Khan on media told reporters after a federal cabinet meeting.
She said the subsidy will be in place for five months on wheat, sugar, rice, pulses and edible oil, as the government is devising long-term sustainable solutions, especially to decrease the prices of electricity, in which she saw the root of the problem.
“High prices of electricity and gas are mother of all evils,” Awan said, “the prime minister has directed his economic team to devise a policy to bring down their per unit rates.”
She said the prime minister has ordered a factsheet on electricity and natural gas import agreements signed by previous governments. “They (the opposition) are shedding crocodile tears now after pushing the country into the economic crisis through their shady deals,” she added.
Meanwhile, IMF delegates have been in Pakistan since Feb. 3 to review of Pakistan’s economic performance for the third tranche of $450 million of the country’s $6 billion bailout package.
Fearing political backlash, the authorities are trying to convince the fund to delay the process of upward revision of electricity and gas tariff during the current fiscal year, FY20.
“The IMF team has expressed its reservations, pointing to the fact that the authorities had made commitment to allow market forces to take their course and let them determine the upward or downward trend of energy tariff. However, this has become a sticking point since the prime minister says the government doesn’t want to increase the rates and the IMF insists on keeping the process purely market-driven,” Sustainable Development Policy Institute (SDPI) director Vaqar Ahmed told Arab News on Tuesday.
The government’s subsidy program was immediately lambasted by the opposition.
“This relief package is a joke to the nation,” as Rana Tanveer, a Pakistan Muslim League Nawaz (PML-N) lawmaker, as the party staged a protest in front of the Parliament House building in Islamabad.