ISLAMABAD, June 12 — Pakistan’s coalition government will present its budget today for the fiscal year to next June, which analysts expect to set ambitious fiscal targets, as it looks to strengthen the case for a new bailout deal with the International Monetary Fund (IMF).
The budget comes a day after the government said economic growth of 2.4 per cent expected in the current year would miss a target of 3.5 per cent, although revenues were up 30 per cent over last year, and the fiscal and current account deficits were under control.
While Pakistan is expected to stick to fiscal prudence under a new IMF programme, growth is expected to stay constrained, said Abid Suleri of the Sustainable Development Policy Institute think tank.
“Many of the measures taken to achieve fiscal sustainability will impact growth negatively, at least in the near future,” he said.
Pakistan is in talks with the IMF for a loan estimated to range from US$6 billion (RM28.3 billion) to US$8 billion, as it seeks to avert a default for an economy growing at the slowest pace in the region.
But a recent economic uptick, following stabilisation measures and falling inflation, as well as Monday’s interest rate cut by the central bank, has made the government optimistic about prospects for growth.
The key policy rate could fall further this year and economic growth would continue to rise, Finance Minister Muhammad Aurangzeb, set to present his first budget, told reporters yesterday.
Markets will watch the budget for a target for proceeds from privatisation, as Pakistan looks to make its first major sale in nearly two decades with the disposal of a stake in its national airline, kicking off a series of such moves.
But concerns remain about the government’s ability to pursue reform, since it is vulnerable to the quirks of coalition politics in the face of rising public pressure against inflationary reform measures.
Tapping undertaxed sectors such as agriculture and retail for additional revenues would prompt protests by farmers and small traders, while spending cuts in discretionary funds for MPs have already squeezed alliances and party loyalties.
The budget will be in line with IMF requirements, said economist Sakib Sherani, but cautioned “the real problem will be adherence to fiscal austerity and prudence and containment of populism”.
— Reuters
