ISLAMABAD, Pakistan – The International Monetary Fund (IMF) says additional measures will be needed to bring Pakistan’s budget for fiscal year 2022-23 in line with the key objectives, according to source, after the country unveiled $47 billion budget for the year.
On Friday, Islamabad unveiled a Rs9.5 trillion ($47 billion) budget for 2022-23 aimed at tight fiscal consolidation in a bid to convince the IMF to restart much-needed bailout payments.
“Our preliminary estimate is that additional measures will be needed to strengthen the budget and bring it in line with key program objectives,” Esther Perez Ruiz, IMF’s Resident Representative to Pakistan, told Reuters.
Pakistan’s Finance Minister said on Saturday that the IMF had expressed concerns about the budget numbers, including fuel subsidies, a widening current account deficit, and the need to raise more direct taxes, according to Business Recorder.
However, he added his government was confident they could adjust the budget to bring the IMF on board and was hopeful of securing a successful review this month.
“Discussions with the authorities continue to obtain more clarity on certain revenue and spending items and allow for a full assessment,” Ruiz said, as the Recorder quoted.
Pakistan is halfway through a $6 billion, 39-month IMF programme that has stalled over the lender’s concerns over the status of some of its objectives, including fiscal consolidation.
The next tranche that Pakistan is to receive upon a successful review is $900 million, and a green light from the IMF would also open up other global funding avenues.
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Earlier this month, China agreed to refinance Pakistan with USD2.3 billion worth of funds amid dwindling foreign exchange reserves of the country.
This came at a time restoration of the country’s delayed International Monetary Fund (IMF) programme depends on the government’s capacity to make a fiscal adjustment of about 2.5 per cent of the GDP.
The fiscal adjustments can be made by increasing the revenues and reducing the expenditure in the next budget, Geo News reported citing The News.
“Good News: The terms and conditions for refinancing of RMB 15 billion deposit by Chinese banks (about US$ 2.3 billion) have been agreed,” said Miftah Ismail, Pakistan’s Federal Minister of Finance and Revenue, in a tweet.
“Inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves.”
Pakistan’s foreign exchange reserves are under severe stress and declined by $190 million to $10.308 billion during the week ended on May 6, according to the State Bank of Pakistan (SBP).