In a recent development of IMF bailout package of $7 billion to Pakistan for 37 months, it has been reported that the package comes with more strict economic conditions for Pakistan. The IMF has clearly mentioned to Pakistan that no further reduction in the prices of electricity as a subsidy will be given, as seen recently in the case of Punjab province, due to the conditions imposed on the loan package. With IMF bailout package comes more difficulties for the already struggling Pakistanis.
Moreover, the National Finance Commission (NFC) award formula will also be evaluated and reviewed closely again following the recent IMF bailout package. Under this, the IMF will also monitor the daily expenditures of the provincial governments and if it finds any unnecessary developments, it will instruct the provinces to cut their expenses to a considerably low extent as well.
Not only this, the energy sector especially the power purchase agreements will also be reviewed in order to comply with the IMF bailout package demands. It should be noted that sectors including agriculture, property and retail will also be brought under tax net as per recent IMF bailout package demands. Not to mention, the first tranche of this $7 billion IMF bailout package is expected to release till September 30 having worth $1 billion.
However, it is pertinent to mention here that the recent IMF statement ahead of confirming the IMF bailout package, reads: “Reflecting disinflation and steadier domestic and external conditions, the State Bank of Pakistan (SBP) was able to cut the policy rate by a total of 450 bps since June, also supported by an appropriately tight FY25 budget. Because of the progress and stability achieved under the nine-month 2023 SBA, the government had embarking on renewed efforts to address these challenges, build resilience and enable sustainable growth.”
It should be noted that the IMF statement appreciated the financial support of China for Pakistan and stated that the new IMF bailout package would not have been possible without the consistent support of China.
On the other hand, the Finance Minister of Pakistan, Muhammad Aurangzeb, said, “Transformation of the economy into an export-driven one necessitates structural reforms, only then could the country move forward in the next three years. We had no choice but to implement economic reforms, which included bringing sectors currently outside the tax net into the fold.”
He further stated, “Prime Minister Shehbaz Sharif believed that business should be handled by the private sector and not by the government. To achieve this, the cabinet’s privatisation committee has advanced the privatisation process of government institutions to its final stages.”
