June 15, 2023: The International Monetary Fund (IMF) has expressed dissatisfaction with Pakistan’s recently presented budget, a blow for the cash-strapped country with only two weeks left until its bailout programme expires.
Pakistan has barely enough currency reserves to cover one month’s imports. It had hoped to have $1.1bn of the funds released in November – but the IMF has insisted on several conditions before it makes any more disbursements. With time for only one last IMF board review before the end of the $6.5bn Extended Fund Facility (EFF), Pakistan was expected to present a budget in line with programme objectives, restore the proper functioning of the FX market, and close the $6bn gap ahead of the board review.
“Staff remains engaged in discussing policies to maintain stability. However, the draft FY24 Budget misses an opportunity to broaden the tax base more progressively,” Esther Perez Ruiz, the IMF’s resident representative in Pakistan, said in a text message to the Reuters news agency. She added that the long list of new tax expenditures further reduces the tax system’s fairness and undercuts the resources needed for vulnerable recipients in the Benazir Income Support Programme.
“The new tax amnesty runs against the program’s conditionality and governance agenda and creates a damaging precedent,” added Perez Ruiz. She said measures to address the energy sector’s liquidity pressures could be included alongside the broader budget strategy. “The IMF team stands ready to work with the government in refining this Budget ahead of its passage,” she said, implying the country still has a chance to unlock its ninth IMF board review before the end of the EFF programme.
Lahore-based economist Hina Shaikh told Al Jazeera even if the Pakistani government revises its budget, it may not be enough to unlock the IMF deal.
“By clearly stating that the budget is inadequate to meet the programme’s objectives, it appears that, at least in its current form, the budget won’t be acceptable to the IMF to resume the bailout before June 30,” she said.
