Pakistan is on track to finalise a staff-level agreement with the International Monetary Fund (IMF) for a bailout exceeding $6 billion by the end of this month, announced Junior Finance Minister Ali Pervaiz Malik on Wednesday.
The country, grappling with escalating domestic dissent over new tax measures, has set ambitious revenue targets in its latest budget, aimed at securing IMF approval to avert an economic crisis.
“We hope to conclude this IMF process within the next three to four weeks,” Malik stated, highlighting the urgency to reach a staff-level agreement before the IMF board’s recess. While estimating the bailout package to exceed $6 billion, Malik underscored that the IMF’s endorsement remains paramount at this juncture.
Pakistan’s fiscal blueprint for the fiscal year starting July 1 includes a daunting tax revenue target of 13 trillion rupees ($47 billion), marking a nearly 40 per cent surge from the previous year.
Concurrently, the government aims to slash the fiscal deficit to 5.9 per cent of the Gross Domestic Product (GDP) from 7.4 per cent in the preceding year.
Malik defended the stringent budgetary measures, asserting that they were essential to pave the way for an IMF programme, which he claimed the lender had acknowledged positively during discussions. However, the anticipated budget approval from the IMF could exacerbate public discontent, analysts warn.
“While these budget reforms may strain the local economy, the IMF programme prioritises economic stabilisation,” Malik affirmed.
Economist Sakib Sherani, from the private firm Macro Economic Insights, highlighted the urgency of sealing a swift deal with the IMF to mitigate pressure on Pakistan’s foreign exchange reserves and currency, given impending debt repayments and the unwinding effects of earlier capital and import controls.
“If delays persist, the central bank may need to temporarily reinstate import and capital controls, leading to a period of uncertainty with potential implications for equity markets,” Sherani cautioned.
In conclusion, Pakistan’s pursuit of an IMF bailout underscores its efforts to stabilise its economy amidst mounting challenges, balancing economic imperatives with public sentiment.
