Pakistan has only one remaining board review under the current International Monetary Fund (IMF) bailout package before unveiling its budget on June 9, a fund official said on Thursday.
“To pave the way for a final review under the current EFF, it is important to restore the proper functioning of the foreign exchange market,” the multilateral lender’s resident representative for Pakistan, Esther Perez Ruiz, told JEE News.
He added that other factors include passing a budget for the 2023-24 fiscal year that meets the program’s goals, and firm and creditworthiness to close the $6-billion gap before the board’s review. Includes achieving financial commitments.
Analysts say the coalition government is hoping to strike a balance between reforms to appease the Washington-based creditor and measures to win over voters in its budget to be announced tomorrow.
Pakistan’s IMF program ended this month with nearly $2.5 billion in funds as it struggles to reach a deal with the lender, as it grapples with record inflation, fiscal imbalances and low reserves. .
General elections are due by November, which the government hopes will end the turmoil caused by the protest campaign led by the Pakistan Tehreek-e-Insaf (PTI) chairman since he was ousted last year. were dismissed in a vote of confidence.
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 low.
“Without the IMF, it will be very difficult for Pakistan to survive in the next fiscal year, so I am sure the government will come up with a budget that is more or less in line with the IMF’s prescriptions,” Miftah said. Miftah said.
A staff-level IMF agreement to release $1.1 billion of the $6.5 billion package has been delayed since November.
The funds are crucial for Pakistan to avoid a balance of payments crisis, and most analysts believe that even after the current program expires, Pakistan will need to continue to do so in the future to avoid defaulting on its debt obligations. A bailout will have to be obtained in the 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.
On Tuesday, the planning minister announced that the budget targets development spending in the new fiscal year at 1,150 billion rupees ($4.02 billion), while inflation is expected to remain 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 If there are very few. Any meaningful steps to expand it.
“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 Rs 9.5 trillion for 2022-23, up from Rs 8.49 trillion in the year’s plans, which had to be scaled back 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.
