Pakistan is on the verge of finalizing a staff-level agreement (SLA) with the International Monetary Fund (IMF) for a bailout exceeding $6 billion this month. This comes after the country successfully addressed all of the lender’s requirements in its annual budget, marking a significant milestone in its efforts to avert another economic crisis. In an interview with Reuters, Minister of State for Finance, Revenue, and Power Ali Pervaiz Malik expressed optimism about reaching an SLA within the next three to four weeks, emphasizing the urgency of sealing the deal before the IMF board recesses.
The finance minister highlighted the ambitious revenue targets outlined in Pakistan’s annual budget, which are designed to garner IMF approval for the loan while simultaneously grappling with growing domestic resistance to new taxation measures. With a tax revenue goal of 13 trillion rupees ($47 billion) for the fiscal year, representing a nearly 40% surge from the previous year, and a concerted effort to reduce the fiscal deficit to 5.9% of gross domestic product, Pakistan is demonstrating its commitment to securing IMF assistance.
Malik underscored the pivotal role of the budget in positioning Pakistan for an IMF program, underscoring the lender’s satisfaction with the revenue measures implemented. Although the budget’s alignment with IMF requirements is crucial, analysts warn that it may intensify public discontent due to its burdensome nature.
Economists have emphasized the pressing need for a swift agreement with the IMF to alleviate pressure on Pakistan’s foreign exchange reserves and currency stability. They warned that if the negotiations prolong, the central bank might be compelled to reinstate temporary import and capital controls, triggering a period of uncertainty. Furthermore, concerns were raised about the potential impact on the equities market, as any delay in securing the IMF bailout could jeopardize the recent rally in the Pakistan Stock Exchange index, which has surged by approximately 10% since the budget presentation in anticipation of the IMF package.
