The IMF discovered a breach of over Rs 2,000 billion in budgetary estimates for 2022–23 in its preliminary analysis, which could cause the budget deficit and primary deficit targets to increase by a significant margin ahead of its important talks with the cash-strapped Pakistani government.
The ninth review under the Extended Fund Facility will be completed by Pakistan and the International Monetary Fund (IMF) starting on Tuesday. The main topics of discussion will be the budgetary slippages and the reconciliation of statistics.
The evaluation would result in the release of Pakistan's pending next installment of funding, which has been stalled since September.
Prior to the budget announcement
Prior to the budget announcement for 2022–23, the government had projected a budget deficit objective of 4.9% of the GDP and a primary deficit to maintain it at positive 0.2% of the GDP.
The IMF is currently requesting that Pakistani authorities implement extra taxing measures totaling Rs 600 billion through a mini-budget, according to sources cited by The News.
According to the newspaper's sources, Pakistani authorities rejected it outright and contended that the primary deficit would not rise to such a level.
IMF's research
According to the research, the IMF has found a 2 trillion breach in budgetary projections for the fiscal year 2022–2023, raising the alarm that the primary and budget deficits could grow by a significant margin.
Senior IMF officials have also decided to include an increase in circular debt owed by Pakistan's cash-strapped energy industry above the ceiling previously agreed upon with the lender of last resort as part of the primary deficit for the current fiscal year 2022–2023.
In the meantime, Pakistan has asked the IMF to waive 500 billion rupees in flood-related expenses when calculating the budget deficit, particularly the primary deficit for the current fiscal year 2022–2023
"The IMF has so far calculated that the primary deficit target of 0.2 per cent of GDP will be breached with a massive margin with a whopping figure of over Rs 1 trillion," sources were quoted as saying by the report.
The IMF further assessed that the coalition government did not recover the fuel price adjustment of Rs 65 billion for the current fiscal year.
The government doled out concessional electricity and gas to the export-oriented sectors which resulted in an increased requirement of Rs 110 billion.
Pakistan's economic crisis
Pakistan is facing the worst economic crisis as its reserves have dropped to a critical level of USD 3.7 billion and need urgent support to avoid default.
The IMF is the only forum that can save the country. But many people wonder about the future of the country without any long-term planning in sight to tackle similar economic situations.
Pakistan secured a USD 6 billion IMF bailout in 2019. It was topped up with another USD 1.1 billion in 2022 to help the country following the unprecedented floods.
But the IMF suspended disbursements in November due to Pakistan's failure to make more progress on fiscal consolidation amidst political turmoil in the country.
Meanwhile, Dawn newspaper in its editorial on Saturday said that while it is crucial to seek immediate IMF funding to shore up its reserves, the government shouldn't focus only on short-term relief.
"The current loan package is set to end on June 30, and if there's no new snag, we will get up to USD 3 billion in funding from the lender."
"This may take care of our immediate balance-of-payments needs but will not be sufficient to cope with a similar payments crisis the next fiscal year and beyond."
"It is, therefore, advisable that the government seek to increase the size of IMF funding and the programme, and extend its duration," the editorial said.
