KARACHI: Analysts expect Pakistan’s budget for the 2023-24 fiscal year to strike a compromise between changes to satisfy the IMF. As well as steps to win over voters in an upcoming election.
Pakistan struggles to reach an agreement with the IMF as it faces record inflation, fiscal imbalances, and low reserves.
The administration hopes a November general election would stop protests led by former premier Imran Khan.
Former finance minister Miftah Ismail claimed IMF funding was necessary to avoid an expansionary budget.
“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 in line with IMF prescriptions,” Ismail added.
Since November, IMF personnel have delayed releasing $1.1 billion of a $6.5 billion package.
Pakistan needs the cash to avoid a balance of payments crisis, and most analysts predict that even when the current programme expires, Pakistan will need a bailout in the 2019 fiscal to avoid defaulting on debt.
Central bank reserves fund imports for a month
May inflation in the 220 million-person nation reached 37.97%. It is a record for the second month in a row and the highest in South Asia.
The planning minister indicated on Tuesday that development spending would be 1,150 billion rupees ($4.02 billion) in the current fiscal year, with inflation forecast at 21%.
Some observers expect the administration to reveal vote-winning measures on Friday before the general election. Even if they have to be cut back.
Fahad Rauf, head of research at Karachi-based brokerage Ismail Iqbal Securities, said he expected a pay hike for government employees and a package for the farm sector, with little, if any, effort to broaden the tax base.
“Banks and taxed industries will continue to feel the heat,” Rauf said, adding that he believed a 10% super tax on more than 15 sectors would be charged again, even though the government declared last year it was a one-time payment.
After IMF dissatisfaction, the government announced a total expenditure target of 9.5 trillion rupees for the 2022/23 year.
Rauf predicted a repetition this year.
Given the need for extra IMF funding, independent economist Sakib Sherani thought the budget will be packed of populist pre-election initiatives that would not survive the July-September quarter.
