Pakistan budget ‘missed opportunity’ as IMF bailout cutoff looms
Global lender expresses displeasure with recently presented budget just two weeks before rescue program ends.
The International Monetary Fund (IMF) has expressed its displeasure with Pakistan’s recently presented budget, a blow to the poor country which has only two weeks to go before its bailout program expires.
Pakistan barely has enough foreign exchange reserves to cover a month’s worth of imports. It had hoped that $1.1 billion of the money would be released in November, but the IMF has insisted on a number of conditions before making any more disbursements.
With time for just one final review by the IMF Board before the end of the $6.5 billion Extended Fund Facility (EFF), Pakistan was expected to present a budget in line with program objectives, the proper functioning of the foreign exchange market would recover and close the $6 billion gap ahead of the council assessment.
“Staff remain engaged to discuss policies to maintain stability. However, the draft budget for FY24 misses an opportunity to broaden the tax base in a more progressive way,” Esther Perez Ruiz, the IMF representative in Pakistan, said in a text message to Reuters news agency.
She added that the long list of new tax spending further erodes the fairness of the tax system and undermines the resources needed for vulnerable recipients in the Benazir Income Support Program.
“The new tax amnesty goes against the program’s conditionality and governance agenda and sets a damaging precedent,” added Perez Ruiz.
She said measures to address liquidity pressures in the energy sector could be included alongside the broader fiscal strategy.
“The IMF team stands ready to work with the government in fine-tuning this budget before it is approved,” she said, suggesting the country still has a chance to unlock its ninth IMF governance review ahead of its end of the EFF program.
Lahore-based economist Hina Shaikh told Al Jazeera that even if the Pakistani government revised its budget, it might not be enough to clear the IMF deal.
“By stating clearly that the budget is insufficient to meet the objectives of the program, it seems that the budget, at least in its current form, will not be acceptable for the IMF to resume the bailout before June 30” , she said.