Daily Times

A disgruntled Ishaq Dar presented Pakistan’s annual budget in parliament on Friday with spending at more than 14 trillion rupees, targeted growth at 3.5 per cent and a reduction in inflation to 21 per cent from a record 38 per cent. It is hoped that the budget this year will help unlock the last $2.5bn left in the IMF’a $6.5bn bailout programme, which expires at the end of this month. With foreign exchange reserves shrinking to less than $4bn, just enough to cover a month’s worth of imports and the rupee’s startling downward trajectory in the face of an increasingly strong dollar, the IMF’s bailout programme is crucial to Pakistan’s survival.

Equally important is our commitment to fiscal discipline-indeed, the focus of the FY24 budget is to strengthen debt sustainability prospects whilst creating increased space for social spending. The inability of successive governments to meet the IMF’s prescriptions and an overall lack of continuity in policies regardless of who is in power has culminated in the crisis that faces us today-Pakistan must pay more than $20bn to foreign governments and lenders by the next spring, and more than $77bn by June 2026. We are fast running out of options. In attempting to avert our colossal balance-of-payments crisis, policymakers have sought to increase taxes. Unfortunately, increased taxes mean less growth and investment which in turn, leads to even more inflation. This month, the World Bank in its global prospects report projected that Pakistan’s prospects for growth in the next two years are anaemic, projecting growth of 2 to 3 per cent lower than our projections.

Indeed, now is the time to give serious thought to long-due structural reforms, which neither the PTI government nor the current coalition alliance has given much attention to. An expansionary budget is out of the question if the intended objective is growth-political instability is virtually choking Pakistan at the moment and a populist budget will likely fuel even more inflation and create more unemployment, eliminating the possibility of the IMF’s support. Currently, our budget does not account for any of these issues and is unlikely to improve the chances of a staff-level agreement with the IMF. *