KARACHI: The government will hope to find a balance between reforms to satisfy the International Monetary Fund and measures to win over voters in an imminent election in its budget for 2023-24 to be announced on Friday, analysts said.
Pakistan’s IMF programme runs out this month with about $2.5 billion in funds yet to be released as it struggles to strike an agreement with the lender, as it grapples with record inflation, fiscal imbalances and low reserves.
A general election is due by November, which the government will be hoping will end turmoil arising from a protest campaign former premier Imran Khan has led since he was ousted last year.
Former finance minister Miftah Ismail said it was essential for the government to secure IMF funding so there was little chance of 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 more or less in line with IMF prescriptions,” Ismail said.
A staff-level IMF agreement to release $1.1 billion of a $7bn package has been delayed since November.
The funds are crucial for Pakistan to avert a balance of payments crisis, and most analysts believe that even after the expiry of the current programme, Pakistan will have to seek a bailout in the upcoming fiscal to avert defaulting on debt obligations.
The SBP reserves can cover imports for about a month.
Inflation surged to 37.97pc in May, a record for the second consecutive month and the highest rate in South Asia.
With the general election looming, some analysts believe the government will announce vote-winning measures on Friday, even if the promises have to be scaled back later.
Fahad Rauf, head of research at Ismail Iqbal Securities, said he expected a pay rise for government employees and a package for the agriculture sector, with more of a burden being piled on an already narrow tax base, and a few, if any, meaningful steps to broaden it.
Independent economist Sakib Sherani said he too believed the budget would be full of populist pre-election measures that would be unlikely to survive the July-September quarter, given the necessity of more IMF support.
Published in Dawn, June 8th, 2023