Pakistan is on the verge of finalising a crucial staff-level agreement with the International Monetary Fund (IMF) for a bailout package exceeding $6 billion, following the fulfilment of all stipulated conditions in its latest annual budget, according to a senior finance official.
Minister of State for Finance Revenue and Power Ali Pervaiz Malik, in a statement to Reuters on Wednesday, confirmed that Pakistan aims to conclude the IMF negotiation process within the next three to four weeks, ideally reaching a staff-level agreement before the IMF board recess.
"The anticipated size of the package is over $6 billion," Malik stated, emphasizing that securing IMF validation remains the primary objective at this stage. The IMF has yet to respond to requests for comments.
In an effort to secure the bailout and prevent another economic crisis, Pakistan's annual budget has set ambitious revenue targets, despite rising domestic discontent over new taxation measures.
The government has projected a tax revenue target of 13 trillion rupees ($47 billion) for the fiscal year starting July 1, marking a near-40% increase from the previous year. Additionally, the fiscal deficit is expected to shrink to 5.9% of GDP from 7.4%.
Malik underscored that the tough and unpopular budget was a strategic move to pave the way for the IMF program. He noted that the IMF was satisfied with the revenue measures undertaken, based on recent discussions. "All major prior actions have been met, with the budget being one of them," Malik said, indicating no significant issues remain to be addressed.
However, analysts caution that while the budget might secure IMF approval, it is likely to exacerbate public anger. Economist Sakib Sherani, who leads Macro Economic Insights, pointed out that the IMF program is fundamentally about stabilization, despite its burdensome implications for the local economy.
Sherani stressed the urgency of reaching a swift agreement with the IMF to mitigate pressure on Pakistan's foreign exchange reserves and currency. This is crucial given the impending maturing debt repayments and the adverse effects of reversing capital and import controls imposed earlier.
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