By Staff Reporter
ISLAMABAD: Pakistan has revised its budget for the fiscal year starting on July 1 to include the latest fiscal tightening measures dictated by the International Monetary Fund (IMF) in a final effort to clinch a stalled rescue package, Finance Minister Ishaq Dar said on Saturday.
Pakistan and the IMF had detailed negotiations for the last three days to complete the pending review, the minister told parliament.
The IMF had raised objections to some of the budget proposals, saying then that tax policies in the budget didn’t broaden the revenue base and an amnesty ran against the bailout programme’s “conditionality and governance agenda.”
For its part, the government responded to the IMF’s concerns, saying that it was “flexible” on the budget and remained engaged with the international lender to reach an “amicable solution.”
The revised budget will raise a further Rs215 billion in new taxes and cut Rs85 billion in spending, as well as other measures to shrink the fiscal deficit. That will revise Pakistan’s revenue collection target to Rs9.415 trillion and put total spending at Rs14.480 trillion.
“As a result of these negotiations, the government is eyeing to impose additional taxes to the tune of 215 billion rupees. These amendments will be tabled. However, we have ensured that the impact of these taxes would not be passed to the downtrodden,” Dar said. “We have decided to reduce our expenditure by 85 billion rupees. However, the reduction will not be from PSDP, salaries of government employees and pensions.”
“I have a belief that if the IMF programme is resumed then it’s all good, but if it doesn’t we will still suffice,” he added.
The minister said the petrol levy will be raised from Rs50 to Rs60 per litre, and capped at the new ceiling for any future changes.
Dar also announced lifting of restrictions on all imports enforced in December in a bid to cut the current account deficit, which has been one of the major concerns by the IMF to release the funds.
Money allocated for cash handouts to the poor was also revised from Rs450 billion to Rs466 billion for fiscal 2024.
“Due to all of the above measures, there will be an improvement in the overall budget deficit,” Dar said.
The review came a day after Prime Minister Shehbaz Sharif met with IMF Managing Director Kristalina Georgieva on the sidelines of the Global Financing Summit in Paris. There is less than a week to go before the IMF’s Extended Fund Facility agreed in 2019 expires on June 30.
Under the $6.5 billion facility’s ninth review, negotiated earlier this year, Pakistan has been trying to secure $1.1 billion of funding, stalled since November.
With central bank foreign exchange reserves barely enough to cover one month of controlled imports, Pakistan is facing an acute balance of payment crisis, which analysts say could spiral into a debt default if the IMF money doesn’t come through.
The IMF funding is critical to unlock other bilateral and multilateral financing for the debt-ridden South Asian economy. “I hope, God willing, that we will have an agreement with the IMF,” Dar said.
A statement issued by the PML-N said Prime Minister Shehbaz Sharif had held a third meeting with IMF Managing Director Kristalina Georgieva before his departure for London in which he had reiterated Pakistan’s commitment to complete the Fund’s programme. The managing director had “appreciated” PM Shehbaz’s commitment to the country, according to the statement.
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