Govt's subsidy plan raises red flags.

ISLAMABAD -- The chances of finalising the ninth review of the troubled $6.5 billion Extended Fund Facility (EFF) from the International Monetary Fund (IMF) soon got bleak after the global lender on Monday raised questions over the government's new fuel subsidy scheme.

The development came as the government decided to dole out subsidies worth billions of rupees on petrol as well as Rs73 billion on wheat flour that could potentially lay landmines in the path of the Fund's programme.

Instead of putting its house in order, the government announced Rs50 per liter subsidy for owners of up to 800cc cars and motorcyclists while Khyber-Pakhtunkhwa and Punjab will give Rs73 billion in wheat flour subsidy cumulatively.

Sources in the finance ministry said that the global lender has inquired about the source of financing of the Prime Minister's petrol scheme. The IMF also asked about the mechanism in implementing the new subsidy programme, they added.

In her reaction, Esther Perez, the Resident Representative of the IMF, told The Express Tribune that the Pakistani 'authorities did not consult with the IMF staff ahead of announcing their recent fuel subsidy proposal'.

She added that the IMF staff was seeking 'greater details on the scheme in terms of its operation, cost, targeting, protections against fraud and abuse, and offsetting measures, and will carefully discuss these elements with the authorities'.

'As a general matter, the IMF sees strengthening support for those eligible for social assistance through the unconditional Kafalat cash transfer scheme (BISP) as the most direct way to help the neediest in Pakistan,' said Esther.

The federal government plans to collect Rs50 per liter extra from car owners of above 800cc category and give it to car owners of below 800cc and motorcyclists.

Prime Minister Shehbaz Sharif has the audacity to waive taxes of the richest commercial banks last month and also withdrew Rs3,000 per month tax on traders in September last year but wants to penalise middle-income group owning 1,000cc cars to fund his political scheme.

The IMF raised queries a day after the Prime Minister's Office announced to give Rs50 per liter subsidy to the 1.3 million owners of 800cc cars and over 20 million motorcyclists and rickshaw owners.

The move may jeopardise the IMF programme, if the government's explanation remained short of the Fund's expectations. The chances of an early IMF deal are already thin due to many political moves made by...