In their efforts to speed up development, many less developed countries have favored low agricultural prices that have had adverse effects on food production, income distribution, and economic growth. The author finds that official policies that subsidize and control prices of agricultural products seem to favor the large-scale farmers and better-off urban populations in developing countries. Such policies tend to depress overall food production and the incomes of small-scale farmers and reduce domestic savings and available foreign exchange. He therefore suggests the reduction or ending of price distortions that restrict agricultural output.
While food subsidies have led to considerable political debate, they have, for the most part, been subjected to only limited economic analysis. Nor has there been much effort to systematically categorize the importance of these subsidies in different countries. The growing interest in the methods of effecting income redistribution, particularly in developing countries, and the attempts to use food subsidies to insulate consumers from the recent exceptional rise in world food prices have, however, made this a subject of particular importance. Further, as a result of this rise in food prices, the financial cost of food subsidy programs has increased sharply, with implications for fiscal and monetary stability and the balance of payments.
International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses Pakistan’s First review Under the Extended Arrangement Under the Extended Fund Facility and Request for Waiver of Nonobservance of a Performance Criterion (PCs) and Modification of Performance Criteria. All quantitative PCs for end-September 2013 were observed except for the one on net international reserves. The indicative target on social transfer payments was also missed, but the technical problems that caused the shortfall have since been rectified. The IMF Staff supports authorities’ request for completion of the first review under the arrangement and for a waiver for the nonobservance of the performance criterion on net international reserves accumulation.
Pakistan’s economy continued to perform strongly owing to sound macroeconomic management and structural reform. Executive Directors advised that tight fiscal and monetary policies are required to reduce inflation and the external current account deficit while lessening pressures on real interest rates. They welcomed the enactment of the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CLT) ordinance. They underscored the need to modernize the energy sector’s regulatory and tariff framework and revive the privatization process. Directors urged action to strengthen public financial management.