Pakistan’s woes unlikely to end as budget contours may not please IMF

Now that Pakistan’s Finance Minister Ishaq Dar has presented the Union Budget, the moot question is, will the International Monetary Fund (IMF) resume the $6.5 billion financial assistance package for the cash starved nation. The current IMF programme that kicked in 2019 will expire this month end.

The programme was stalled last year.

Two independent sources said that though the Shehbaz Sharif government has stated that Islamabad will reach out to the multilateral lender right after the budget presentation, there is little hope that the deal will fructify immediately.

“Islamabad is hopeful–naturally they are hoping that the programme is resumed but policymakers are preparing for a sort of plan B,” one of them told India Narrative.

Dar’s expansionary budget reflecting an increase of 50 per cent over the ongoing financial year’s approved budget – owing to high interest outflows may not augur well with the IMF.

In fact, the Express Tribune in a report said that “the budget documents showed that the government did not have any hope that the IMF programme would revive.”

Meanwhile, Dar lashed out at the IMF, blaming it for the devaluation of the Pakistani currency.

He also said that the Pakistani rupee has been undervalued artificially and this must be reversed.

While presenting the Economic Survey, a day before the Budget announcements, he said, “Devaluation is the mother of all economic problems.”

One of the preconditions that the IMF has set, for the resumption of the bailout package, is to allow market forces determine the value of the country’s currency. The IMF has made it amply clear that the government cannot have a role in controlling the value of the (Pakistani) rupee that hit an all time low of Rs 299 to a US dollar on May 11 after the arrest of Imran Khan, the former Prime Minister and leader of Pakistan Tehreek e Insaaf (PTI).

Pakistan’s foreign exchange reserves are currently below the $4 billion level while the deadline of external debt repayment is inching closer. Pakistan will default if it fails to repay $3.7 billion by this month end.

Even as Pakistan prepares for a new financial year, beginning next month, citizens will have to brace for tougher times ahead.

Also read: Pakistan’s forex reserves plunge below $4 billion, several companies wind up operations