- Pakistan’s IMF program is ending this month.
- Inflation reached 37.97% in May.
- Miftah Ismail says it was important for the government to get IMF funding.
KARACHI: Pakistan’s government must find a balance between reforms to satisfy the International Monetary Fund and measures to win over voters in its budget for the 2023-24 fiscal year to be announced on Friday, analysts said. will hope
Of Pakistan IMF program About $2.5 billion in funds is due to be released this month as it struggles to reach a deal with lenders, as it grapples with record inflation, fiscal imbalances and low reserves.
A general election is due by November, which the government hopes will end the turmoil caused by the protest campaign led by former Prime Minister Imran Khan who was ousted in a no-confidence vote last year. was after
Former Finance Minister Miftah Ismail said that it is important for the government to get IMF funding, so the chances of an expansionary budget are slim.
“Without the IMF, it will be very difficult for Pakistan to survive in the next financial year, so I am sure that the Govt. Budget This is more or less in line with IMF prescriptions,” Ismail said.
A staff-level IMF agreement to release $1.1 billion of the $6.5 billion package has been delayed since November.
These funds are critical for Pakistan to avoid a balance-of-payments crisis, and most analysts believe that even after the current program expires, Pakistan will need to avoid defaulting on its debt obligations. A bailout will have to be obtained in the next financial year.
Central bank reserves can cover imports for about a month.
Inflation in the country of 220 million people rose to 37.97 percent in May, the second straight month on record and the highest in South Asia.
This was announced by the Planning Minister on Tuesday. Budget Development spending targets 1,150 billion rupees ($4.02 billion) in the new fiscal year, while inflation is expected to hover at 21 percent for the year.
With the general election looming, some analysts believe the government will announce vote-winning measures on Friday, even if the promises have to be scaled back later.
Fahad Rauf, head of research at Karachi-based brokerage Ismail Iqbal Securities, said he expected a pay hike for government employees and a package for the agriculture sector to further burden an already tight tax base, and some , meaningful steps to expand it, if any.
“The banking and tax industries will continue to feel the heat,” Rauf said, adding that he believed the so-called super tax of 10% would be reimposed on more than 15 sectors, even though the government last year Said it was one. – Off payment.
A year ago, the government had set a total expenditure target of Rs9.5 trillion for 2022/23, down from Rs8.49 trillion in the year’s plans after IMF dissatisfaction.
Rauf said he expects the same to happen this year.
Independent economist Saqib Sherani said he too believed the budget would be full of pre-election measures that were unlikely to last through the July-September quarter given the need for more IMF support.