After meeting all of the criteria set out by the lender in its annual budget, Pakistan is aiming to secure a staff-level agreement on an IMF rescue of over $6 billion this month, according to Reuters, who spoke with the country’s junior finance minister.
In an effort to secure a loan from the International Monetary Fund (IMF) and prevent another economic collapse, the South Asian nation has set ambitious revenue objectives in its yearly budget, despite growing domestic unrest over new taxing policies.
Minister of State for Finance, Revenue and Power Ali Pervaiz Malik stated on Wednesday that the goal is to reach an agreement at the staff level before the IMF board takes a break, adding that they want to conclude the process within the next three to four weeks.
Regarding the package’s size, he stated, “I think it will be north of $6 billion,” though he stressed that the main focus right now was on the IMF’s accreditation.
With a fiscal deficit that dropped sharply to 5.9 percent of GDP from 7.4 percent the year before, Pakistan aimed for tax collection of 13 trillion rupees ($47 billion) for the fiscal year that started on July 1, a near-40 percent increase from the next year.
The goal of implementing a harsh and unpopular budget, according to Malik, was to pave the way for an IMF program, and the lender was pleased with the revenue measures implemented after their discussions.
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“There are no major issues left to address, now that all major prior actions have been met, the budget being one of them,” added Malik.
The budget might get the go light from the IMF, but experts say it might make the public even more furious.
“Obviously they (budget reforms) are burdensome for the local economy but the IMF programme is all about stabilisation,” Malik pointed out.
Given Pakistan’s impending debt repayments and the aftermath of the unwinding of capital and import restrictions, economist Sakib Sherani of private firm Macro Economic Insights warned that the country’s currency and foreign exchange reserves would be under pressure unless the IMF and Pakistan reached a swift agreement.
“If it takes longer, then the central bank may be forced to temporarily re-instate import and capital controls,” he added. “There will be a period of uncertainty, and one casualty is likely to be the rally in equities.”
The benchmark share index of Pakistan climbed 1% during trading on Wednesday, hitting an intraday high of 80,348 points at 0640 GMT, a new record.
With persistent hope for a rescue package from the International Monetary Fund to support the faltering economy, the index has risen by about 10% since the budget was unveiled on June 12.
