Pakistan is aiming to secure a staff-level agreement on an International Monetary Fund (IMF) bailout exceeding $6 billion this month, following the fulfillment of all the lender's requirements in its latest annual budget, as disclosed by the country's junior finance minister to Reuters.
The South Asian nation has established ambitious revenue targets within its annual budget to facilitate the IMF's approval of a loan, intended to prevent another economic crisis, despite growing domestic discontent over new tax measures. 'We anticipate concluding this IMF process within the next three to four weeks,' stated Ali Pervaiz Malik, Minister of State for Finance, Revenue, and Power, on Wednesday, with the objective of finalizing a staff-level agreement before the IMF board's recess. 'I believe the package will exceed $6 billion,' he noted, although he emphasized that the IMF's validation is currently the primary focus. The IMF has yet to respond to a request for comment.
Pakistan has set a tax revenue goal of 13 trillion rupees ($47 billion) for the fiscal year starting July 1, marking a nearly 40% increase from the previous year, and a significant reduction in its fiscal deficit to 5.9% of gross domestic product from 7.4% the year before. Malik explained that the tough and unpopular budget was designed as a foundation for an IMF program, adding that the lender is content with the revenue measures implemented, based on their discussions. 'There are no major issues left to address, now that all major prior actions have been met, the budget being one of them,' Malik stated. Although the budget may gain IMF approval, it could intensify public discontent, according to analysts.
'Obviously, these budget reforms are burdensome for the local economy, but the IMF program is about stabilization,' Malik commented. Sakib Sherani, an economist leading private firm Macro Economic Insights, emphasized the urgency of a swift IMF deal to alleviate pressure on Pakistan's foreign exchange reserves and currency, given the country's upcoming debt repayments and the repercussions of lifting earlier capital and import controls. 'If the process takes longer, the central bank may be compelled to temporarily reinstate import and capital controls,' he warned. 'There will be a period of uncertainty, and one likely casualty could be the rally in equities.' Pakistan's benchmark share index climbed 1% during trading on Wednesday, hitting a record intraday high of 80,348 points at 0640 GMT. The index has surged approximately 10% since the budget was unveiled on June 12, buoyed by ongoing optimism about securing an IMF bailout package to support the faltering economy.
