IMF goes public on Pakistan’s budget criticism

IMF goes public on Pakistan’s budget criticism
IMF goes public on Pakistan’s budget criticism ,Pakistan’s budget for the fiscal year 2023-24 has received criticism from the International Monetary Fund (IMF). The IMF expressed dissatisfaction, stating that the government missed an opportunity to broaden the tax base, reduce tax expenditures, and comply with the tax amnesty conditions set by the IMF. The IMF emphasized the need for major changes in the budget and offered to work with the government to refine it before its passage.
The IMF also urged Pakistan to increase the tax collection target of the Federal Board of Revenue (FBR) to around Rs9.8 trillion, instead of the proposed target of Rs9.2 trillion. Additionally, the IMF considered the non-tax revenue target of Rs2.9 trillion unrealistic. To reach a broader agreement on budgetary numbers for the next financial year, Pakistan will need to make significant changes in its budget framework.
Pakistan has requested China to refinance commercial loans of $1.3 billion within the current month. However, without the revival of the IMF program, the foreign exchange reserves held by the State Bank of Pakistan may drop below $3 billion. Efforts are being made by Pakistan and the IMF to revive the stalled Fund-sponsored program under the $6.5 billion Extended Fund Facility (EFF), and the next 48 hours are crucial for achieving a breakthrough.
The repayment of $900 million to multilateral creditors by the end of June 2023, along with other upcoming repayment requirements ranging from $4-6 billion from July to November 2023, poses challenges for Pakistan. The country is concerned about managing the bridge financing during the political transition, particularly after the installation of the caretaker setup in August 2023.
IMF goes public on Pakistan’s budget criticism ,The IMF has raised questions about resource mobilization, power sector spending, and other issues. The government aims to revive the economy while maintaining stability and avoiding measures that could disrupt stabilization efforts. The government will engage in technical-level discussions with the IMF to address the fund’s concerns and seek clarification on various matters.
Dr. Khaqan Najeeb, a former adviser to the Ministry of Finance, expressed concerns about Pakistan’s dollar liquidity crunch. The country faces payments of $3.2 billion until the end of June, and even with Chinese rollovers and refinancing, additional funds will still be required to pay multilateral and bilateral partners. This situation could put pressure on foreign exchange reserves, which are estimated to reach an uncomfortable level with a current account deficit of nearly $400 million in June. The repayment of $23 billion in debt servicing, including a rollover of $10 billion, in the next financial year adds to the challenges faced by Pakistan
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