Pakistan needs to pass programme-friendly budget to unlock funds: IMF

Business Saturday 10/June/2023 09:27 AM
Pakistan needs to pass programme-friendly budget to unlock funds: IMF

Islamabad: The International Monetary Fund (IMF) Resident Representative for Pakistan, Esther Perez Ruiz on Thursday asserted that Pakistan must pass a budget that matches the program objectives in order to restart the loan facility, which has been blocked for months, The News International reported.

The funds are crucial for Pakistan to avert a balance of payments crisis, and most analysts believe that even after the expiry of the current programme, Pakistan will have to seek a bailout in the upcoming fiscal to avert defaulting on debt obligations. The official emphasized the IMF's broad expectations for the future budget, saying, "The focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space for increased social spending."

"More such spending would defray the impact of inflationary pressures on Pakistan's most vulnerable people," he News International reported quoting Ruiz as saying.

Analysts believe Shehbaz Sharif's government will strike a balance in its budget, which will be announced tomorrow, between reforms to please the Washington-based lender and efforts to win over voters in an upcoming election, The News International reported.

Pakistan's IMF program expires this month, with over USD 2.5 billion in funding yet to be released as the country seeks to reach an agreement with the lender while dealing with record inflation, fiscal imbalances, and low reserves.

A general election is scheduled for November, which the government hopes will resolve the uncertainty caused by the protest movement led by the chairman of the Pakistan Tehreek-e-Insaf (PTI) since his oster in a no-confidence vote last year.

A staff-level IMF agreement to release USD 1.1 billion of a USD 6.5 billion package has been delayed since November.

Central bank reserves can cover imports for about a month.

Inflation surged to 37.97 per cent in the country of 220 million people in May, a record for the second consecutive month and the highest rate in South Asia.

On Tuesday, the planning minister announced that budget targets for development spending would be 1,150 billion rupees (USD 4.02 billion) in the new fiscal year, while inflation for the year is projected at 21 per cent.

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, The News International reported.

A year ago, the government set a total expenditure target of Rs9.5 trillion for the 2022-23 year from Rs8.49 trillion the year plans had to be scaled back after IMF discontent.