Pakistan and the International Monetary Fund (IMF) have initiated discussions for a new and expanded bailout programme aimed at addressing the country’s economic challenges. Led by Finance Minister Muhammad Aurangzeb, Pakistan’s delegation, including Governor of the State Bank of Pakistan Jameel Ahmed and Chairman of the Federal Board of Revenue Amjed Zubair Tiwana, met with the IMF mission chief to Pakistan, Nathan Porter, to commence negotiations.
Acknowledging the successful completion of the Stand-By Arrangement (SBA), the finance minister highlighted improvements in macroeconomic indicators and reiterated the government’s commitment to further reforms. Sources familiar with the negotiations revealed that while discussions on specific sectors would continue, groundwork laid during the recent SBA would expedite the process. The upcoming federal budget, scheduled tentatively for June 6-7, is expected to incorporate fiscal adjustments of around 1.5 per cent of GDP, totalling approximately Rs1.6 trillion.
To achieve this adjustment, a combination of revenue enhancements, expenditure rationalisation, and privatisation is envisaged. The government aims to reform pensions and reduce development spending while expanding the tax net through the transformation of general sales tax into a value-added tax (VAT). Petroleum levy is earmarked as a significant non-tax revenue source, with a target of at least Rs1.1 trillion.
Commitments to the IMF include continued adjustments in gas and electricity tariffs, market-based exchange rate mechanisms, and addressing circular debt through private sector involvement. However, political unrest and geopolitical tensions pose risks to the reform agenda.
Concurrently, the Cabinet Committee on State-Owned Entities (SOEs) reviewed the implementation of the SOEs Policy 2023, aligning with IMF reform directives. Minister Aurangzeb directed ministries to propose categorisations for SOEs by May 20, emphasising the privatisation of non-essential functions. Governance and financial management deficiencies in SOEs were highlighted, urging prompt action to halt fiscal losses. The committee urged the Central Monitoring Unit to finalise and publish the report promptly to expedite restructuring and privatisation efforts.