IMF is Not Convinced with Pakistan’s Budget for FY-2024

The International Monetary Fund (IMF) expressed concern with Pakistan’s budget, noting worries over the nation’s constrained foreign exchange reserves and the absence of policies to increase the tax base. During ongoing policy discussions with Pakistan, Esther Perez Ruiz, the resident representative of the IMF, brought up these concerns.

Pakistan is currently in a hazardous situation with only enough foreign exchange reserves to pay for imports for one month. Pakistan had intended to get $1.1 billion from the IMF in November to help with this problem. Before making any further payments, the IMF has set down a number of requirements that must be satisfied.

The IMF’s principal critique of Pakistan’s proposed budget for the fiscal year 2024 is that it does not sufficiently and progressively broaden the revenue base. Perez Ruiz emphasised the significance of putting policies in place that would guarantee a more equitable tax system and stop the depletion of funds intended for weaker recipients, such as those receiving aid from the Benazir Income Support Programme.

Perez Ruiz also criticised the budget’s inclusion of a broad list of new tax expenditures, saying that doing so would weaken the tax system’s fairness and cut funding for social assistance programmes. She also raised alarm about the new tax amnesty that was included in the budget, which she claimed ran counter to the requirements of the IMF’s programme and undermined attempts to improve governance. Perez Ruiz contends that this action establishes a detrimental precedent.

She did admit, though, that there was a chance to solve the liquidity issues in the energy sector with the budget. According to Perez Ruiz, actions to relieve these pressures might be incorporated into the overall budget strategy, offering a more thorough strategy for tackling the nation’s economic problems.

Perez Ruiz responded to the IMF’s criticism of Pakistan’s budget by assuring that the IMF team is prepared to work with the government to improve the budget before it is approved. This shows a desire to cooperate in addressing the issues brought up by the IMF and ensuring a more efficient and long-lasting fiscal structure.

It’s important to remember that the United States has endorsed the IMF’s programme for Pakistan. Recently, US Finance Secretary Janet Yellen reaffirmed Washington’s support for the IMF’s initiatives in Pakistan, underscoring the significance of global collaboration and aid in navigating the nation’s economic issues.

It is unclear how the government will respond to the IMF’s concerns and work towards a budget that encourages fiscal stability, equity, and sustained economic growth while policy discussions between Pakistan and the IMF continue.