Pakistan’s new fiscal budget aims to secure IMF bailout

Pakistan’s coalition government is set to unveil a bold fiscal plan in the upcoming budget for the 2024/2025 fiscal year, aiming to bolster the country’s position in talks with the IMF for a vital new bailout agreement, Reuters reported on Monday.

Government officials and analysts expect a “contractionary” budget with spending cuts to address the gap between Pakistan’s revenue and expenses, a key requirement for IMF approval.

This comes after Pakistan narrowly avoided a default last year thanks to a short-term $3 billion IMF bailout package. While the previous measures brought some control to the fiscal and external deficits, they also resulted in significant drawbacks.

Economic growth has slowed significantly, with the current year projected to be only 2 per cent after a contraction last year. Inflation has also been high, averaging nearly 30 per cent in the last financial year and 24.52 per cent over the past 11 months.

The upcoming budget is expected to target a higher growth rate of 3.6 per cent or the next fiscal year. However, Prime Minister Shehbaz Sharif faces a balancing act.

He has publicly committed to implementing tough reforms since taking office in February, but rising prices, unemployment, and a lack of job creation have intensified political pressure on his coalition government.