PM Office seeks Rs200b to offset inflation impact

PM Imran wants to bail out lower- and middle-income groups

Shahbaz Rana February 16, 2022
PM Imran addressing the launching ceremony of “Raast”, Pakistan’s instant digital payment system in Islamabad on Feb 16, 2022. Photo: APP


The Prime Minister (PM) Office has asked for a Rs200 billion budget to immediately provide relief to the inflation-hit people amid tight fiscal controls imposed by the International Monetary Fund (IMF) that did not leave any cushion for additional spending.

PM Imran Khan wants to bail out the lower- and middle-income groups from the adverse impacts of inflation and his office has asked for the additional budget of around Rs200 billion for the purpose, sources told The Express Tribune.

A few meetings have been held between the Ministry of Finance and the PM Office to find some space in the budget. However, so far nothing has been finalised, including the amount, due to fiscal constraints, they added.

Read: Petroleum products prices break all records

Another meeting was held in the Ministry of Finance on Monday in which the additional PM Office secretary proposed to divert funds from the Public Sector Development Programme and some other areas. The sources said that Finance Minister Shaukat Tarin did not like the idea, saying in the meeting that it was the job of the finance ministry to find out the fiscal space.

“Whatever will be done, will be done by creating some fiscal space,” Tarin said when approached to comment about the demand of the PM Office in light of the IMF restrictions.

The sources said that the matter has also been discussed at the level of the prime minister and the finance minister.

The inflation rate rose to 13% last month – the highest level seen in the last two years and also the highest pace among South Asian countries. The ruling party had to face defeat in the first phase of the local bodies’ elections in Khyber-Pakhtunkhwa due to soaring inflation and divisions within its ranks, forcing the government to review its strategy.

The PM Office sought funds amid rising political uncertainty in the country after the opposition parties announced that they would table a no-confidence motion in the National Assembly against the prime minister.

The sources said that the government was considering various proposals that include providing subsidised fuel to motorcyclists, increasing minimum wage to Rs25,000 and encouraging woman employment through existing development schemes.

Read More: PM Imran launches 'Raast' instant digital payment system

The government already announced providing subsidised essential items to the lower-income groups and for the purpose it has decided to divert Rs40 billion from the existing budget of the Benazir Income Support Programme. No additional funds could be provided, as the government’s hands are tied under the IMF programme.

The prime minister may formally launch the ration scheme at the weekend in collaboration with the provincial governments of Punjab and Khyber-Pakhtunkhwa.

The inflation in Pakistan is skyrocketing because of the rupee depreciation, increase in the prices of petroleum products and electricity as well as commodities globally.

The IMF imposed a condition to create primary surplus of Rs25 billion in the current fiscal year, which did not leave any room for giving additional money to the PM Office, a senior finance ministry official told The Express Tribune. He said that Pakistan and the IMF were tentatively scheduled to hold talks for the seventh review of the programme next month and the government would take up the matter with the IMF.

Overall, the federal government’s budget deficit is expected to be over Rs4 trillion but for the purpose of the programme, the IMF excluded the interest payments on loans, spending on Covid-19 vaccines and clearance of dues of the Independent Power Producers.

After adjusting these expenditures, the IMF has put a condition that there will be primary surplus of Rs25 billion on June 30 – a task that seems quite uphill after the Federal Board of Revenue too started missing its monthly revenue targets.

The underlying primary balance has been targeted at virtually zero for the current fiscal year, excluding 1.2% of the GDP for clearing dues of the IPPs and spending on Covid-19 vaccines, showed the IMF report released this month.

The IMF has already expressed concerns about deviating from the fiscal consolidation path and went on to say that the $6 billion programme objectives might not be achieved due to these deviations.

Read Also: Economic woes feeding PM Imran’s panic: Shehbaz

Approved in June, the budget was on track to deliver an adjusted primary deficit but on the expenditure side, the government allowed for large increases in public wages and allowances, a doubling of subsidies, and an increase in investment of over 50%, according to the IMF.

The IMF has already asked Pakistan to cut the development budget by Rs200 billion to Rs700 billion, saying that the fiscal anchor has been a gradual improvement in the primary balance to ensure fiscal sustainability, entrench macroeconomic stability, and build resilience.

However, a few decisions that the government took in recent weeks has put the fiscal sustainability at stake. The federal cabinet has approved increase in spending under the parliamentarians’ scheme from Rs46 billion approved in the budget to Rs64.2 billion.

It also approved an increase in the salaries of Rangers and those Grade 1 to 19 civil service employees who did not get special pay packages.


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