The International Monetary Fund has expressed its disappointment over Pakistan’s recent annual budget, calling it “insufficient” to meet the aims of its aid programme for the cash-strapped country.
This is not good news for Pakistan, which is currently in a deadlock over getting more funds from the international fund. The IMF’s criticism comes just weeks ahead of the July 31 deadline to review a $6.7 billion loan programme.
Pakistan’s Finance Minister Ishaq Dar on Friday unveiled the budget for the 2023/24 fiscal year, targeting economic growth of 3.5 percent.
Collecting more taxes to fill the government’s coffers seemed to be the main budget agenda. The Pakistan government said that it targets total tax revenue of 9.2 trillion Pakistani rupees in 2023-24. For the same fiscal, the government aims to generate non-tax revenue of 3 trillion Pakistani rupees.
However, IMF has criticised the tax policies announced in the latest budget. The international lender said that tax policies “misses an opportunity to broaden the tax base in a more progressive way.” The organisation added that the new tax expenditures reduce “the fairness of the tax system.”
According to the IMF, the new tax amnesty scheme runs against the organisation’s conditionality and good governance agenda. According to the international lender’s website, the borrower country needs to adjust its economic policies to overcome the problems that led it to seek financial assistance.
Meanwhile, Pakistan is already talking to bilateral creditors in a bid to change some terms of its repayment structure. This is likely to ease the debt burden on the economy.
Pakistan faces about $22 billion of external debt payments for the next fiscal, which begins on July 1. What will worry government officials is the fact that Pakistan’s external debt burden is about five times its foreign reserves.
During the week ending on June 2, Pakistan’s total foreign exchange reserves stood at around $3.9 billion, after falling nearly $179 million in a week.
Pakistan bracing for extreme weather events
Meanwhile, the South Asian country is aiming to avoid the repeat of the deadly 2022 flashfloods that killed over 1,700 people.
According to a Bloomberg report, Pakistan’s meteorological department has “predicted that there is a possibility of extreme weather events in the summer of 2023.”
The report added that these extreme weather events could lead to riverine floods, flash flooding, landslides, and urban flooding.
Last year’s flashfloods led to extensive damage to crops, roads and rail infrastructure, with damages totaling more than $30 billion.
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