IMF raises issues with Pakistan’s FY23-24 budget; calls it ‘missed opportunity’

Islamabad:  The IMF has raised several issues in Pakistan’s budget for the fiscal year 2023-24, calling it a “missed opportunity” but expressed its readiness to work with the cash-strapped country to refine the budget ahead of its passage in Parliament.

The government unveiled a Rs 14.4 trillion budget for 2023-24 in the National Assembly last week as it battled to fend off a looming default due to shrinking foreign reserves.

A day before its tabling, IMF Resident Representative for Pakistan, Esther Perez Ruiz, said Pakistan needed to satisfy the Washington-based lender on three counts, including the budget for the upcoming fiscal year before its board reviews whether to release at least some of the USD 2.5 billion pending disbursement under the 2019 Extended Fund Facility (EFF) set to expire at the June end.

In a statement late on Wednesday, Ruiz said that a new tax amnesty scheme proposed by the government in the budget sets a “damaging precedent” and runs against the programme’s conditionality, the Dawn newspaper reported. The statement did not specify which particular scheme the Fund was referring to.

It also notes that the draft FY24 budget “misses an opportunity to broaden the tax base in a more progressive way, and the long list of new tax expenditures reduces further the fairness of the tax system and undercuts the resources needed for greater support for vulnerable BISP (Benazir Income Support Programme)recipients and development spending”.

Ruiz further said that measures to address the energy sector’s liquidity pressures could be included alongside the broader budget strategy, the report said.

The IMF official had earlier pointed out that the lender had time only for one board meeting before the current programme ends.

Ruiz said the IMF remains engaged to discuss policies to maintain stability, and “it stands ready to work with the government in refining this budget ahead of its passage”.

With reserves at critical levels for the past several months, Pakistan was expected to get around USD 1.2 billion from the IMF in October last year as part of the EFF’s ninth review. But almost eight months later, that tranche has not materialised as the Fund says Pakistan has been unable to meet important prerequisites.

Pakistan’s efforts to unlock access to the already agreed USD 6.5 billion loan package are in a quagmire as the budget needs to satisfy the global lender to secure the release of more bailout money for the cash-strapped country.

Just weeks away from its expiry, the programme’s ninth review is still in the doldrums, while the tenth review, which was originally part of the plan, is all but out of the question, according to the report.

It is feared that Pakistan might default on external financing commitments without the active support of the fund.

Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.