IMF demands, poll politics pushes Pakistan in a tight spot

Business Friday 09/June/2023 08:37 AM
IMF demands, poll politics pushes Pakistan in a tight spot

Karachi : Pakistan which undergoing an economic crisis and political instability is in a tight spot to revive its stalled USD 6 billion loan programme.

In its budget for 2023-24, which will be unveiled on Friday, the government will attempt to strike a compromise between reforms to appease the International Monetary Fund (IMF) and initiatives to win over voters in an imminent election, reported Dawn. As Islamabad fails to reach a deal with the lender and suffers from record inflation, fiscal imbalances, and low reserves, Pakistan's IMF programme expires this month with roughly USD 2.5 billion still to be released, the report continues.

Dawn is a Pakistani English-language newspaper launched in British India.

The government will be hoping that the general election, which is scheduled for November, will put an end to the unrest caused by the protest movement that former premier Imran Khan has spearheaded since his ouster last year.

Ex-finance minister Miftah Ismail said that it was necessary for the government to secure IMF funding so that there is little chance of an expansionary budget, as per Dawn.

Ismail said, "Without the IMF, it would be very difficult for Pakistan to survive the next fiscal year, so I'm sure the government will come up with a budget that is more or less in line with IMF prescriptions."

Since November, a staff-level IMF decision to deliver USD 1.1 billion of a USD 7 billion package has been postponed.

The money is necessary for Pakistan to avoid a balance of payments crisis, and the majority of analysts predict that even when the current programme expires, Pakistan will need a bailout in the upcoming fiscal year to avoid defaulting on its financial obligations, according to Dawn.

For the second consecutive month, inflation reached a record high of 37.97 per cent in May, the highest rate in South Asia.

Ahead of the general election, several analysts predict that the government will present vote-winning measures on Friday, even if they must eventually be pulled back.

Head of research, Ismail Iqbal Securities, Fahad Rauf said, "I expected a pay rise for government employees and a package for the agriculture sector, with more of a burden being piled on an already narrow tax base, and a few, if any, meaningful steps to broaden it," reported Dawn.