June 13, 2022 (MLN): The country’s plan to contain its deficit by cutting expenditure may not be enough to get the International Monetary Fund (IMF)’s nod for the resumption of its loan program, according to economists at Citigroup Inc, quoted Bloomberg.
In a federal budget 2022-23, the government has set a target to reduce the budget deficit to 4.9% of GDP with higher GDP estimations of Rs78.12trn against the FY22 GDP of Rs53.87trn.
Meanwhile, the tax-to-GDP ratio is budgeted to rise to 9.2% of the gross domestic product in the year starting July 1 from 8.6%, which seems low versus Pakistan’s emerging market peers and its own history, Johanna Chua and Gaurav Garg wrote in a note to clients Monday.
Interest payments are estimated to consume about 44% of revenue.
“We await further fund feedback,” Chua and Garg wrote, before meetings due this month between IMF staff and Pakistani officials.
The country is seeking an immediate disbursement of $900 million from the IMF, to help avert a potential default. Surging food and fuel prices have stoked Asia’s second-fastest inflation and debt repayments eroded foreign-exchange reserves to below $10 billion as of June 3, or enough to cover less than two months of imports.
Pakistan needs at least $41 billion in the next 12 months, according to Finance Minister Miftah Ismail, which analysts including Saad Khan from IGI Securities Ltd. anticipate will be met but only barely, it added.