As the Pakistan Muslim League-Nawaz (PML-N) government gears up to present its first federal budget for the fiscal year 2024-25 on June 12, the looming shadow of the International Monetary Fund (IMF) shapes much of the financial discourse.

The country’s application for an $8 billion new IMF loan programme underscores its reliance on international financial assistance, which comes with stringent conditions. reached out to experts to understand the implications of IMF’s involvement and the broader economic challenges faced by Pakistan.

IMF’s influential role

The IMF’s involvement in Pakistan’s budget formulation is significant, essentially dictating the framework within which the budget must be crafted. Arif Habib Limited Managing Director and CEO Ahsan Mehanti emphasised the importance of adhering to IMF conditions to secure the much-needed financial support. 

He explained: “The IMF will approve the new programme once the federal budget adheres to the conditions advised by IMF.” These conditions include crucial reforms such as tax reforms, tariff rationalisation, and the elimination of subsidies.

Meanwhile, Abid Qaiyum Suleri, Executive Director of the Sustainable Development Policy Institute (SDPI), elucidated the specifics of these conditions. “The IMF is asking us to balance our expenses with the income,” he noted, pointing out that the budgetary policies will focus on reducing expenditures, particularly non-targeted subsidies, and increasing revenue by tapping into under-taxed sectors like retail, agricultural income, and gains from property transactions.

Additionally, measures to reduce energy circular debt by passing on the cost of electricity generation and the price of imported fuel are anticipated.

Economic growth and fiscal sustainability

The impact of the IMF’s recommendations on Pakistan’s economic growth and fiscal sustainability is a double-edged sword. On one hand, adherence to IMF conditions can lead to greater fiscal discipline and sustainability. Suleri highlighted that “under the umbrella of an IMF programme, Pakistan will be following fiscal prudence and trying to remain within a pre-agreed target of fiscal deficit.”

Facebook Comments Box
Translate »