The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement. Achieving consensus on the Memorandum of Economic and Financial Policies (MEFP) to present before the Fund’s Executive Board for the release of a $700 million tranche under the $3 billion Standby Arrangement (SBA) program.
The agreed fiscal framework indicates an expected increase in general government and government-guaranteed debt. Including the IMF’s share, to Rs81.836 billion by the end of June 2024, compared to Rs77.9 trillion at the end of September 2023.
The projection indicates that total public debt and liabilities. Which amounted to Rs68 trillion in FY22-23, are expected to increase by Rs11.8 trillion in the current fiscal year. Primarily due to the rising fiscal deficit.
The Fund estimates a fiscal deficit increase of Rs8.227 trillion for the current fiscal year, equivalent to 7.8 percent of GDP.
Despite the government’s efforts to persuade the IMF for a lower projection of debt servicing, the IMF has not accepted the government’s stance.
The current fiscal year is projected to witness debt servicing on domestic and external loans standing at Rs8.627 trillion.
The government will need to secure budget financing amounting to Rs7.5 trillion domestically. With only Rs1 trillion available as foreign budgetary support.
The IMF also foresees an increase in debt servicing to Rs9.621 trillion for the next fiscal year.
Subsidies remain unchanged at Rs1.39 trillion for the current fiscal year. Even though only Rs2.5 billion has been released by the government during the first quarter.
Defence spending is also maintained at Rs1.8 trillion for the current fiscal year.
On the fiscal side, both the IMF and Pakistan have agreed to cut development spending at federal and provincial levels.
The federal government has reduced development spending from Rs843 billion to Rs782 billion for the current fiscal year. The government had initially allocated Rs950 billion for PSDP projects in the current fiscal year.
For provincial-level development programs, the IMF projects a reduction from Rs1,440 billion to Rs1,325 billion for the current fiscal year.
As for revenues, the FBR’s target remains unchanged at Rs9.415 trillion for the current fiscal year.
On the non-tax revenue side, the IMF and Pakistan have agreed to increase the collection on petroleum levy from Rs869 billion to Rs918 billion for the current fiscal year.