Reports suggest Pakistan budget may fall short of unlocking IMF loan
IMF-Pak
As per economists at Citigroup Inc. Pakistan's new budget and its plan to trim its deficit by cutting down on spending may not be enough to convince the International Monetary Fund (IMF) to resume its loan program. Bloomberg reports that in hopes of avoiding potential default, the South Asian nation is currently seeking a $900 million immediate disbursement from the IMF. As of June 3, the nation's foreign exchange reserves rest at below USD ten billion, only enough to cover less than two months of imports. The nation faces Asia's second-fastest inflation rate due to rising food and fuel prices.
Ahead of the meetings between Pakistan and IMF staff, in a note to clients Monday, Johanna Chua and Gaurav Garg of Citigroup wrote that the tax-to-GDP ratio is expected to climb to 9.2 per cent of GDP in the fiscal year beginning July 1 from 8.6 per cent.
Watch |IMF calls Pakistan's budget 'problematic', urges to raise more direct taxes
They said that this appears modest compared to Pakistan's developing market counterparts and its own experience. Interest payments are expected to account for around 44 per cent of revenue, reports Bloomberg.
Chua and Garg further wrote that they await further information regarding the fund.
As per the nation's finance minister, Pakistan needs a minimum of $41 billion in the next 12 months. Analysts anticipate that these requirements will be met, but with some difficulty.
On Friday, Pakistan released a 9.5 trillion Pakistani rupee ($47.12 billion) budget for 2022-23, focused on tight fiscal consolidation in order to persuade the International Monetary Fund (IMF).
Pakistan hopes to sign a staff level agreement with the IMF this month, according to Pakistan's finance minister Miftah Ismail.
The International Monetary Fund (IMF) has voiced concern about Pakistan's recently revealed budget, according to Ismail, but the administration is optimistic it can make revisions to satisfy the lender.
(With inputs from agencies)
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