Pakistan is on the verge of securing a significant financial rescue deal from the International Monetary Fund (IMF). The country has fulfilled all the necessary requirements set by the IMF, according to Ali Pervaiz Malik, Pakistan’s Minister of State for Finance, Revenue, and Power. The expected bailout, exceeding $6 billion, aims to prevent another economic crisis.
To meet the IMF’s conditions, Pakistan has set ambitious revenue targets in its annual budget. The government aims to collect 13 trillion rupees ($47 billion) in taxes for the fiscal year that began on July 1. This target represents a nearly 40% increase from the previous year. Additionally, Pakistan plans to reduce its fiscal deficit to 5.9% of its gross domestic product (GDP), down from 7.4% the previous year.
Malik emphasized that the challenging budget was designed to pave the way for the IMF program. “There are no major issues left to address now that all major prior actions have been met, the budget being one of them,” he said. The IMF has yet to respond officially, but Malik is hopeful for a final agreement within the next three to four weeks.
While the budget reforms may satisfy the IMF, they have sparked public dissatisfaction due to new tax measures. Malik acknowledged the difficulties but stressed that the IMF program is crucial for economic stabilization.
Economist Sakib Sherani, from Macro Economic Insights, highlighted the urgency of the IMF deal to support Pakistan’s foreign exchange reserves and currency. Delays could force the central bank to re-impose import and capital controls, creating uncertainty and potentially affecting the stock market.
Despite public concerns, the stock market has responded positively. Pakistan’s benchmark share index, the KSE-100, rose by 1% on Wednesday, reaching a record high of 80,348 points. The index has rallied about 10% since the budget announcement on June 12, driven by optimism over the anticipated IMF bailout.
In summary, Pakistan is on track to secure a substantial IMF bailout by meeting the lender’s stringent conditions. While the budget measures are tough and unpopular, they are seen as necessary steps towards economic stability and growth.