IT seems the finance minister’s meeting with the US treasury secretary last week has yielded some understandings that are already beginning to play themselves out.

Consider the decisions made at the last Economic Coordination Committee (ECC) meeting. Subsidies totalling Rs255 billion were approved for ‘exporters’ and, it seems, a conscious decision has been made to pull government funds away from schemes to promote remittances and channel them towards exports instead. So far, so good.

The problem comes when you realise that these are subsidies and the country is on an IMF programme which specifically forbids subsidies. For example, only this past May, in the last review of the programme, the government committed that it “will refrain from providing any new fiscal incentives, such as tax breaks or subsidies (including on bank credit)”. Those last four words — “including on bank credit” — were inserted between the second and third reviews, and this is language that specifically points to schemes exactly of the sort they are trying to introduce, with a view to prohibiting them.

Another commitment specifically listed in the review documents says the government will “[r]efrain from offering any new fiscal incentive or guaranteed returns (in any currency) to firms or any investment project”. Note the term “any new fiscal incentive” as well as “guaranteed returns”, because both these conditions are breached by the new Long-Term Export Growth Financing Facility. The other, the Exim Bank Export Finance Scheme (E-EFS), however, is a repackaged legacy........

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