Pakistan meets IMF’s requirements for bailout package – FinMin
Pakistan has addressed all the International Monetary Fund’s (IMF) requirements in its recently-passed annual budget for a bailout package exceeding $6 billion this month, junior Finance Minister Ali Pervaiz Malik said on Wednesday.
The South Asian nation has set ambitious revenue targets in its budget strategy to secure IMF approval for a loan and avoid another economic crisis, despite possible opposition to new tax measures domestically.
“We hope to culminate this [IMF] process in the next three to four weeks,” Malik said on Wednesday. His goal is to finalise a staff-level agreement before the IMF board recess.
When discussing the package size, Malik mentioned a figure “north of $6 billion,” while emphasising that securing IMF validation remains the primary focus. The IMF has not yet responded to a request for comment.
Pakistan’s new fiscal year started on July 1st with a budget targeting tax revenue of 13 trillion rupees ($47 billion), a 40 per cent rise from the previous year. The budget also aims to reduce the fiscal deficit to 5.9 per cent of GDP from 7.4 per cent in the previous year.
Malik explained that the challenging and potentially unpopular budget serves as a stepping stone for an IMF programme. Based on their discussions, Malik assured that the IMF is satisfied with the implemented revenue measures.
“There are no major issues left to address, now that all major prior actions have been met, the budget being one of them,” Malik said. However, analysts warn that while the budget might win IMF approval, it could also fuel public discontent.
Economist Sakib Sherani emphasised the need for Pakistan to promptly finalise a deal with the IMF to manage upcoming debt repayments and potential pressure on foreign exchange reserves and currency due to the removal of controls on capital and imports.
“If it takes longer, then the central bank may be forced to temporarily re-instate import and capital controls,” Sherani said. “There will be a period of uncertainty, and one casualty is likely to be the rally in equities.”
Despite these concerns, Pakistan’s stock market index (.KSE) rose one per cent on Wednesday, reaching a record high of 80,348 points.
The rally, up 10 per cent since the budget presentation on June 12th, reflects optimism about a potential IMF bailout package to boost the economy.
Attribution: Reuters
