Finance Minister Ishaq Dar announced on Saturday that the federal government had made several modifications to the fiscal year 2024 budget in a final attempt to secure a stalled rescue package with the International Monetary Fund (IMF).
Addressing the National Assembly, Dar stated that Pakistan and the IMF engaged in detailed negotiations as a final effort to complete the pending review.
Dar provided updated figures for the FY24 budget, including an increased revenue collection target of Rs9,415 billion for the Federal Board of Revenue (up from Rs9,200 billion) and an elevated share of Rs5,399 billion for the provinces (up from Rs5,276 billion).
The target for the federal government’s total expenditure was raised to Rs14,480 billion from Rs14,460 billion. These measures are expected to result in an improvement in the overall budget deficit.
Furthermore, Dar announced that the petrol levy would be raised from Rs50 to Rs60 and capped at the new ceiling for any future changes. Import restrictions imposed in December to reduce the current account deficit have been lifted, and the allocation for cash handouts to the poor has been revised to Rs466 billion for FY24.
Meanwhile, Prime Minister Shehbaz Sharif held a third meeting with IMF Managing Director Kristalina Georgieva before his departure for London. The prime minister reiterated Pakistan’s commitment to completing the IMF’s program, and Georgieva “appreciated” Shehbaz’s dedication to the country, as per a statement issued by the PML-N.
In the upcoming fiscal year, the federal government plans to generate an additional Rs215 billion through new taxes and reduce spending by Rs85 billion, along with implementing various measures to decrease the fiscal deficit, according to Dar.
He emphasized that the government had fulfilled all prior requirements and achieved compliance with the IMF’s demands. However, due to an external financing gap, Pakistan’s case could not be presented to the IMF.
To move the review forward, Pakistan and the IMF agreed on a “last final push,” leading to detailed negotiations over the past three days with an IMF delegation to finalize the ninth review.
The finance minister explained that the suggestion for Rs215 billion in new taxes emerged from these talks, ensuring that the burden would not fall on the poor and vulnerable segments of society.
He also assured that the Rs85 billion spending cut would not impact the federal development budget, salaries, or pensions of government employees.
Pakistan’s ninth review under the 2019 Extended Fund Facility (EFF) for the release of $1.2 billion remains pending with less than a week remaining until the program’s expiry on June 30.
Last week, the IMF raised concerns about Pakistan’s proposed measures in the FY24 budget, stating that they contradicted the conditionality of the EFF program. The government expressed flexibility regarding the budget and ongoing engagement with the IMF to reach a mutually agreeable solution.
Pakistan’s critically low reserves over the past months have heightened the need for an IMF bailout.
Without it, the country may face default. The expected $1.2 billion tranche from the IMF has been delayed since October last year due to Pakistan’s inability to meet important prerequisites. The prospects for the program’s tenth review seem increasingly unlikely under the circumstances.
