Pakistan is scheduled to deliver its budget as the IMF observes.

Pakistan is scheduled to deliver its budget as the IMF observes.

With one eye on the fragile economic situation and the other on the upcoming national elections in October, the Pakistani government is getting ready to deliver its yearly budget.

According to local media sources, Finance Minister Ishaq Dar will present the budget to parliament on Friday. It calls for spending more than 14 trillion rupees ($50 billion), 3.5 percent GDP, and a drop in inflation to 21 percent from a record 38 percent, among other goals.

READ THE LIST OF 4 ITEMS AGAIN. In light of the growing list of crises, one of the four Pakistani prime ministers is hoping for an IMF agreement this month. 2 of 4 Pakistan’s inflation rate sets a record for the second month in a row 3 of 4
Pakistan’s ailing economy suffers further blow as a result of the demonstrations Four out of four Imran Khan supporters claim that their companies have been attacked in Pakistan.
The sources said that the administration of Prime Minister Shehbaz Sharif also aims to raise more than 9 trillion rupees ($32 billion) via taxes.

Pakistan expects that the budget for this year would enable it to access the remaining $2.5 billion of a $6.5 billion bailout program from the International Monetary Fund (IMF), which is set to expire at the end of this month.

The 230 million-person South Asian nation desperately needs the IMF assistance to avoid defaulting on increasing debt and recover from an extended economic crisis.

According to the most recent data released by the central bank, Pakistan’s foreign currency reserves have decreased to less than $4 billion, which is only enough to pay for imports for less than a month. The Pakistani rupee has fallen more than 50% versus the US dollar over the last year.

According to a report by the Reuters news agency, the IMF stated on Thursday that it has been speaking with the Pakistani government about the budget.

As stated by Esther Perez Ruiz, the IMF’s resident representative for Pakistan, “the focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space for increasing social spending.”

Without the IMF, Hina Shaikh, an economist at the International Growth Centre in London, told Al Jazeera that Pakistan will struggle to make it through the next fiscal year.

“Fiscal restraint and inflation control should be prioritized in order to enable us to reactivate the IMF programme, whether it is the current one or a new one after the budget. Averting a balance of payments crisis, guaranteeing a freely fluctuating currency rate, and putting gasoline costs in line with global pricing must be the goals of this budget, she added. Policymakers need to focus on cutting spending if they want to stabilize the economy, according to Durre Nayab, economist at the Pakistan Institute of Development Economics.

“Our measures to cut the deficit usually include raising taxes, which inhibits investment and growth. Further inflation results from this in turn. The solution, in my opinion, is to reduce wasteful spending, she told Al Jazeera.

The devastating floods of last year, which claimed more than 1,800 lives and caused millions of people to be evacuated, put even more pressure on Pakistan’s already fragile economy. Additionally, the flood destroyed crops, roads, bridges, train networks, and homes, resulting in damages of more than $30 billion.

The World Bank projected growth of 2 and 3 percent for Pakistan in its global prospects report this month, labeling the country’s economic recovery as “anemic” for the next two years.

The report stated that “In Pakistan, the aftereffects of the August 2022 floods, together with policy uncertainty and limited foreign exchange resources to pay for imports of food, energy, and intermediate inputs, have depressed activity, with industrial production contracting by about 25% in the year to March 2023.”

In addition, Pakistan is now dealing with political unrest brought on by the ouster of former Prime Minister Imran Khan in April of last year. The problem in an election year has been made worse by large-scale rallies by Khan’s followers over his recent incarceration and the accompanying crackdown on his Pakistan Tehreek-e-Insaf (PTI) party, which Khan blames on the military.

If the political crisis and the IMF discussions had been handled properly, according to Ali Hasnain, associate professor of economics at Lahore University of Management Sciences, things would not have gotten so bad.

He told Al Jazeera, “We need to look closely and seriously at implementing fundamental changes, which neither the PTI administration did nor the present governing coalition is doing.

A populist budget prepared with the general elections in mind, according to Shaikh, might make matters worse.

“An expansionary budget at this point will fuel more inflation and unemployment and would also imply that we may not be able to resume the stalled IMF programme, making it potentially more difficult to negotiate a new one after the elections,” she added.

According to local media sources, Finance Minister Ishaq Dar will present the budget to parliament on Friday. It calls for spending more than 14 trillion rupees ($50 billion), 3.5 percent GDP, and a drop in inflation to 21 percent from a record 38 percent, among other goals.

READ THE LIST OF 4 ITEMS AGAIN. In light of the growing list of crises, one of the four Pakistani prime ministers is hoping for an IMF agreement this month. 2 of 4 Pakistan’s inflation rate sets a record for the second month in a row 3 of 4
Pakistan’s ailing economy suffers further blow as a result of the demonstrations Four out of four Imran Khan supporters claim that their companies have been attacked in Pakistan.
The sources said that the administration of Prime Minister Shehbaz Sharif also aims to raise more than 9 trillion rupees ($32 billion) via taxes.

Pakistan expects that the budget for this year would enable it to access the remaining $2.5 billion of a $6.5 billion bailout program from the International Monetary Fund (IMF), which is set to expire at the end of this month.

The 230 million-person South Asian nation desperately needs the IMF assistance to avoid defaulting on increasing debt and recover from an extended economic crisis.

According to the most recent data released by the central bank, Pakistan’s foreign currency reserves have decreased to less than $4 billion, which is only enough to pay for imports for less than a month. The Pakistani rupee has fallen more than 50% versus the US dollar over the last year.

According to a report by the Reuters news agency, the IMF stated on Thursday that it has been speaking with the Pakistani government about the budget.

As stated by Esther Perez Ruiz, the IMF’s resident representative for Pakistan, “the focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space for increasing social spending.”

Without the IMF, Hina Shaikh, an economist at the International Growth Centre in London, told Al Jazeera that Pakistan will struggle to make it through the next fiscal year.

“Fiscal restraint and inflation control should be prioritized in order to enable us to reactivate the IMF programme, whether it is the current one or a new one after the budget. Averting a balance of payments crisis, guaranteeing a freely fluctuating currency rate, and putting gasoline costs in line with global pricing must be the goals of this budget, she added. Policymakers need to focus on cutting spending if they want to stabilize the economy, according to Durre Nayab, economist at the Pakistan Institute of Development Economics.

“Our measures to cut the deficit usually include raising taxes, which inhibits investment and growth. Further inflation results from this in turn. The solution, in my opinion, is to reduce wasteful spending, she told Al Jazeera.

The devastating floods of last year, which claimed more than 1,800 lives and caused millions of people to be evacuated, put even more pressure on Pakistan’s already fragile economy. Additionally, the flood destroyed crops, roads, bridges, train networks, and homes, resulting in damages of more than $30 billion.

The World Bank projected growth of 2 and 3 percent for Pakistan in its global prospects report this month, labeling the country’s economic recovery as “anemic” for the next two years.

The report stated that “In Pakistan, the aftereffects of the August 2022 floods, together with policy uncertainty and limited foreign exchange resources to pay for imports of food, energy, and intermediate inputs, have depressed activity, with industrial production contracting by about 25% in the year to March 2023.”

In addition, Pakistan is now dealing with political unrest brought on by the ouster of former Prime Minister Imran Khan in April of last year. The problem in an election year has been made worse by large-scale rallies by Khan’s followers over his recent incarceration and the accompanying crackdown on his Pakistan Tehreek-e-Insaf (PTI) party, which Khan blames on the military.

If the political crisis and the IMF discussions had been handled properly, according to Ali Hasnain, associate professor of economics at Lahore University of Management Sciences, things would not have gotten so bad.

He told Al Jazeera, “We need to look closely and seriously at implementing fundamental changes, which neither the PTI administration did nor the present governing coalition is doing.

A populist budget prepared with the general elections in mind, according to Shaikh, might make matters worse.

“An expansionary budget at this point will fuel more inflation and unemployment and would also imply that we may not be able to resume the stalled IMF programme, making it potentially more difficult to negotiate a new one after the elections,” she added.