The federal government has confirmed to the International Monetary Fund (IMF) that it will maintain a primary surplus of 1% of GDP.
Islamabad: According to media reports, the federal government has devised a plan to meet the IMF’s objectives and is committed to controlling development and current expenditure budgets. For a brand new bailout package worth $7 billion, the government has promised the IMF to ensure 1% of GDP as a number one surplus. In the first quarter of this fiscal year, only 15% of funds for approved development projects will be released by the Ministry of Planning, Development, and Special Initiatives: 20% in the second, 25% in the third, and 40% in the fourth quarter.
The statement mentioned that inflation decreased while foreign exchange reserves increased last year, which brought economic stability to the country. This new loan program would contribute to financial stability in Pakistan. During the loan program, Pakistan would enhance its tax revenue by increasing taxes as a share of GDP by 3%. The retail sector will also witness expansion in the tax net.
The IMF statement emphasizes the need for joint economic efforts between federal and provincial governments. Under the 18th Amendment, federal and provincial governments must reassess the redistribution of expenses for economic expenditures. Provinces need to spend more money on education, public health, and infrastructure while enhancing sales and agriculture taxes for better revenue generation. Until January 1, 2025, federal and provincial governments should enact necessary legislation regarding individuals. And corporate income taxes with the help of friendly nations.
The IMF has noted that Pakistan wishes to improve its monetary governance and enforce reforms for robust financial management and governance. Under the IMF-supported program, the public budget may advance in transparency and accountability. It additionally aims to boost performance in public spending, even by lowering monetary deficits, for sustainable economic growth.
In addition, the IMF stated that Economic performance has been resilient over the past few years. Inflation reduction and improvement in external balances showed progress. However, challenges remain, such as structural reforms needed to enhance productivity and competitiveness and address social injustices.
Meanwhile, the Papal Response to this program has led. The Pakistani government must enact structural reforms within the energy sector, especially power generation. And the taxation system, including broadening the tax net, documentation measures, and good governance. Which would help streamline regulations, thus attracting investments and economic diversification. The government will also strengthen social safety nets to protect vulnerable groups from any shocks originating from the economy. While ensuring inclusive growth.
Nevertheless, critics fear the adverse effects of austerity measures linked to the IMF Programme, mainly on weak segments of society. Who may not have coping mechanisms to counter such impacts. They propose a balanced approach prioritizing economic growth alongside social welfare protection.
Pakistan has two major tasks: apply strict economic reforms and alleviate their effects on people. People’s satisfaction with the IMF program depends on policy execution effectiveness and political desire. And international endorsement while Pakistan pursues sustainable economic stability and growth.
