Islamabad:
The International Monetary Fund has established a stricter budgetary for Pakistan by setting the primary budgetary budgetary objective for the next financial year at 1.6% of the size of the economy which, this time, should be carried out largely containing expenses.
Compared to 1% of the primary excess budgetary objective of the GDP of the financial year, which is calculated after having made interest payments, the IMF set the target at 1.6% for the financial year 2025-2026, according to the details of the fund published on Saturday after the approval of the new loan.
Unlike this exercise where the primary excess objective had been designed to achieve only according to the increase in taxes, the objective of the next year depends largely on restriction expenses.
Details have shown that compared to 0.7% of the increase in GDP of the total income / GDP ratio, the IMF projected 1.3% of the reduction in expenditure GDP.
The Macroeconomic Table of the IMF has shown that total revenues from federal and provincial governments are estimated at RS15.2% of GDP or RS19.6 Billions at the expected size of next year. As a result, the objective of the Federal Board of Return will be RS14.3 Billions and approximately RS4 Billion should be recovered due to non -tax income. The rest will come from the provinces.
Total expenses of the five governments estimated at 21.6% of GDP for this financial year, are provided for 20.3% of GDP or approximately RS26.3 Billions, according to the projections of the IMF. These are hardly any Rs1 billion more than the estimated expenses this year, forcing all governments to maintain their belt.
Given that the main surplus objective is exclusive to interest payments, the sources of the Ministry of Finance said that confinement of expenses would be largely on the side of development without available place on the side of defense expenses.
Pakistan cannot afford to reduce or contain the defense budget in light of new tensions in the region and approximately 2% of GDP will be allocated to defense expenses, the sources of the Ministry of Finance said. The government said it increases the defense budget by at least 18% compared to last year, they added.
Nigel Clarke, Deputy Director General of the IMF and Chairman of the IMF board of directors who approved two $ 2.4 billion packages on Friday, said the risks for Pakistan’s prospects remain, in particular the uncertainty of global economic policy, the increase in geopolitical tensions and persistent interior vulnerabilities.
He said that in this context, the Pakistani authorities must maintain solid macroeconomic policies and accelerate reforms to protect macroeconomic gains and underline medium-term growth led by the private and sustainable sector.
The Ministry of Finance plans to allocate 921 billion rupees or 0.7% of GDP for the development budget for the next financial year.
An amount of approximately RS1.35 Billions or just over 1% of GDP is put aside to grant subsidies in the next financial year, the sources said. From these energy sector grants are estimated at RS1.04 Billions or 0.8% of GDP, sources said.
Some cabinet ministers are not favorable to the allocation of a large budget for development pie when it cannot in particular be spent during the financial year. There are huge waste on behalf of development spending, which were also admitted by the Ministry of Planning this week.
The IMF has planned the overall budget deficit at 5.1% of GDP or 6.6 rumbox for the next fiscal year. In terms of economy size, the deficit is 0.8% of the lower GDP than this exercise but almost at the same level in absolute terms.
Friday, the IMF finished the first examination of the program and allowed an immediate disbursement of around 1 billion dollars by refusing an unjustified opposition of Indian. The IMF board of directors has also approved the installation of resilience and sustainability (RSF), with access to around 1.4 billion dollars.
The IMF said that, as part of the rescue package, key priorities include the creation of macroeconomic sustainability thanks to the coherent implementation of healthy macro policies, in particular the reconstruction of international reserve buffers and the widening of the tax base. He also underlined the need to advance reforms to strengthen competition and increase productivity and competitiveness; Reform public enterprises and improve the supply of public services and the viability of the energy sector; And build climate resilience.
The IMF noted that inflation fell to a historic hollow of 0.3% in April, and the progress of disinflation and more stable national and external conditions have enabled the Pakistan State Bank to reduce the rate of policy by a total by 11% since June 2024.
The IMF has said that Pakistan’s official official reserves of gross exchange reserves are expected to reach $ 13.9 billion at the end of June 2025 and continue to be rebuilt in the medium term. He planned $ 17.7 billion in reserves in the next financial year and a low current account deficit of 0.4% of GDP.
However, he saw no increase in foreign direct investment in the next financial year, estimated at only 0.6% of GDP for the next fiscal year.
Nigel Clarke, deputy director general, said that “Pakistan has made significant progress in restoring macroeconomic stability despite a difficult environment. Since approval of prolonged fund installations, the economy continues to recover, with significantly lower inflation and external buffers, especially stronger, he added.
“The firm implementation of the 2010 financial year’s budget and the adoption of key tax reforms, in particular agricultural income tax, underlie the process of reconstruction of the policy.
“The position of tight monetary policy of the State Bank of Pakistan (SBP) has been essential in the reduction of inflation to historical stockings. Monetary policy should remain appropriate and dependent on the data to ensure that inflation is anchored in the target range of the SBP, the underlined fund.
According to Nigel, a more flexible exchange rate will facilitate the adjustment of external and domestic shocks, helping to reconstruct the reserves.
