Pakistan stands to secure one board review under the current bailout package of the International Monetary Fund (IMF) if measures in its budget, set to be unveiled on Friday, meet the lender’s expectations, a Fund official said. The statement from a senior Fund official comes ahead of the country’s budget announcement scheduled for tomorrow (Friday). Today, the National Economic Survey, which assesses the state of the economy in the outgoing fiscal year, will also be unveiled.

The IMF programme runs out this month with about $2.5 billion in funds, under three prior reviews, yet to be released, as the country struggles to strike a deal with the lender while battling record inflation, fiscal imbalances and low reserves. 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.

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. Passing a budget for fiscal year 2024 that meets programme objectives is key to paving the way for a final review under the current bailout, the IMF’s resident representative for Pakistan, Esther Perez Ruiz said.

“The focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space to increase social spending,” she told a foreign news agency on Thursday. More such spending would defray the impact of inflationary pressures on Pakistan’s most vulnerable, Ruiz added, but it needed more progress to identify spending and revenue-generating measures in order to achieve this.

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.

Credit: Independent News Pakistan-INP