Islamabad: Pakistan’s government will present its annual budget in parliament on Friday, with the crisis-hit country due to hold elections by November to satisfy the IMF if there is any chance of releasing more bailout money.
The risk of default on sovereign debt is rising, the economy grappling with a double deficit and record high inflation, further reducing the popularity of Prime Minister Shehbaz Sharif’s coalition ahead of the vote.
With the main opposition leader, former prime minister Imran Khan, locked in a dangerous conflict with the country’s powerful military, the latest bout of political instability could result in the economy drifting closer to the edge of the cliff.
Against the backdrop of this political drama, Finance Minister Ishaq Dar is set to deliver his budget speech in Parliament on Friday after 4:00 pm (1100 GMT).
Some of the budget figures were announced earlier this week, including development spending of 1,150 billion Pakistani rupees ($4 billion) and an economic growth target of 3.5% for the coming fiscal year.
Sources have also told Reuters that the initial budget proposals envisage a fiscal deficit of 7.7% of GDP, with total spending at 14.5 trillion Pakistani rupees ($50.7 billion) and revenue collections at 9.2 trillion Pakistani rupees ($32.2 billion). dollar). The proposals also set an inflation target of 21%, well below the record high of nearly 38% inflation recorded in May.
The International Monetary Fund said on Thursday that it is discussing the budget with Pakistan.
Sharif’s government is hoping to persuade the IMF to unlock at least $2.5 billion in a $6.5 billion program that Pakistan entered into in 2019 and is due to expire at the end of this month. Is.
“The focus of discussions on the FY24 budget is to balance the need to strengthen prospects for debt sustainability while creating room for increased social spending,” Esther Perez Ruiz, the IMF’s Resident Representative for Pakistan, said on Thursday.
Pakistan missed almost all of its economic targets set in the last budget, especially its growth target, which was initially set at 5%, was revised earlier this year to 2%. The growth rate for the financial year ending June 30 is now estimated to be just 0.29%.
Foreign exchange reserves have fallen below $4 billion, barely enough to cover a month’s imports, according to data released by the central bank on Thursday.
The government has no fiscal space to introduce popular measures that would win it votes or incentives to boost economic activity, limited avenues to raise revenue in the short term, and domestic and international debt obligations continue to mount.
Sharif’s alliance may ease some of the troubles surrounding opposition leader Khan, whose party has faced defections of key leaders following a military crackdown.
Khan was removed in a parliamentary vote of confidence last year, but polls show he remains Pakistan’s most popular politician. He is now fighting several legal cases ranging from corruption to incitement and abetment to murder, which could result in him being barred from contesting elections.
($1 = 286.6200 Pakistani rupees)
(Reporting by Gibran Peshim; Editing by Simon Cameron-Moore)