Budget 2023-24 Under the Umberalla of IMF or Without IMF

Budget 2023-24 is around the corner and the poor masses including lower salaried class are anxiously waiting for budgetary relief measures in the shape of hefty increase in pay to cope with the sky rockting and all time high inflation in Pakistan.

A million dollar question is that whether sufferings of the comman man will mitigate in the upcoming budget or will further exacerbate?

For the last one month or so a very important aspect of Pakistan's nose diving economy remained out of sight due to unseen political happenings which created after the arrest of Imran Khan in  Al-Qadir Trust  graft case from Islamabad High Court by Rangers. 

The mayhem created by PTI supporters brought bad name for in and outside the country.

Under such circumstances every Pakistani is mulling over whether there will be any kind of relief for them in the upcoming budget or otherwise ?

Current year is elections' year and every government in Pakistan tries to present a relief budget to muster support from voters by budgetary relief measures in their last year of government. 

Inflation has reached to 38% all time high and Pakistani Government had a dead lock with IMF over the approval of 9th review despite hectic efforts by federal government.

Under such tough circumstances how a government can present a  budget without IMF when Pakistan had to made payments of 25bn dollars in next fiscal year to foriegn lenders including bridging the trade deficit gap of 9bn dollars.

Pakistan 

and IMF 

IMF and Pakistani Government both had love and hate relationship from very early stage which is still continuing. 

Pakistani Prime Minister Shahbaz Sharif had personally  talked with IMF Managing Director Kristalina Georgieva and expressed his firm resolve to complete all IMF terms for the program.

It is important to note that IMF programme's  9th review is ending on 30 June 2023.

Pakistani Prime Minister Shahbaz Sharif and other related ministers have said that Pakistan had fulfilled all conditions of IMF for the materialisation of programme but things stuck at financial guarantees from friendly countries.

Pakistani government had taken several steps to appease IMF like electricity tariff hike,smashing the subsidies and its raised raised interest policy rate to 21pc to unlock the IMF funding but all went fruitless.

IMF mission Head for Pakistan Nathan Porter 

Pakistani Government and IMF relations got further deteriorated when IMF's mission chief to Pakistan Nathan Porter reffered about the political situation of Pakistan which Pakistan officials termed his remarks as meddling in Pakistan's affairs.

Many analysts are of the view that Pakistan can present budget without IMF by allocating funds in all categories by playing with the figures but the real challenge will be the execution of the budget, how to complete the targets set in the budget in the coming days.

An IMF official,Esther Perez Ruiz said on Thursday that Pakistan has to satisfy IMF on three aspects to pave the way for final review under current Extended Fund Facility programme. 

1. Restoring the proper functionality of FX market.

2. Pass FY 2023-24 budget consistant with IMF objectives.

3. Securing firm and credible financing commitments to close $6 billion  

    gap ahead of the board 

When asked from Finance Minister Ishaqe Dar that how Pakistan will go into budget without IMF. In response he assured that we will give business and people friendly budget taking in account common man's plight.

He further told that on the instructions of prime minister Shahbaz Sharif  data has been shared with IMF against my wishes.

During a presser Ishaqe Dar termed it unfair and undemocratic to enter into IMF programme in election year.

Finance Minister Ishaqe Dar met with US ambassador to muster support for IMF programme as 9th review is ending on 30th June and its completion is not in seen.

Moreover,  Prime minister Shahbaz Sharif has gone to Paris to attend New Global Financing Pact being held in Paris from 22-23 June and there he aspired to meet with IMF Managing Director Kristalina Georgieva regarding completion of 9th review.  

Officials say if this didn't materialise then chances  of IMF programme completion are bleak.

Deputy Finance Minister Ayrsha Ghouse Pasha said that we have fulfilled all terms of IMF and desirous of completion of 9th and 10th review.

She further elaborated that controlling the sky rockting inflation and fiscal deficit are the biggest challenges for the government and we can't give tax free budget under such circumstances.

What is IMF Budget

In IMF budget,  government had to collect huge amounts of taxes, ending subsidies given to masses on different fronts, increase in electricity tariff and negation of hefty increase in pay.

In the forthcoming budget IMF has also stressed to increase tax collection. Presently Federal Board of Revenue has set the tax collection figure from 9 to 9.2 trillion for the upcoming fiscal year.

Ishaque Dar

Finance Minister Ishaqe Dar while delivering post budget speech told journalists that Pakistan has plan 'B' which can't be disclosed in open. He further added that Pakistan will not default in the coming months.

What is Populast Budget?

In election's year every government tries to give people friendly  budget for the sake of political fortunes.

In populast budget salaries are increased to maximum level, subsidies are given on all fronts including electricity and allocation of development funds for the GDP frowth. If governments go with IMF then such relief measures are opposed by the foreign lender.

Analysts are of the view that government should go with IMF as if it opt for relief budget for vote wining purpose then it brought will more miseries although relief seems good in the starting but situation worsen later on when rupee will further slide down and inflation will increase. 

Pay Increase

Government servants of all class are pinning hopes on federal budget 2023-24 to get relief in the shape of salary increase.

Analysts are of the opinion that of government succeed get IMF programme then there will be no or meagre salary increase while if goes for populast budget without IMF then hefty increase in pay is expected. 

Plight of Pakistan's Economy 

Pakistani economy is in quagmire and circumstances are nearing towards default without IMF programme.

Recently published fiscal monetary report depicts that Pakistani Government failed to achieve the tax collection targets including reduction in government expenditures and budgetary deficit.

 According to Finance Division budget deficit has climbed upto 3.5 trillion rupees much to woes of government as well as masses who will bear the brunt.

Nose diving depreciation of rupee against dollar, plummeted foriegn remmitences against previous years and decreasing exports all indicating that Pakistani government should present realist budget instead of giving populast one.

State owned enterprises are also weighing heavy on Pakistan's economy eroding trillion of rupees every year.

As Pakistan has to pay 25bn dollars in next fiscal year to foreign lenders which is impossible to pay without IMF. 

All doors of foriegn lenders will open only when IMF programme got materialised.

If Pakistan gave a populast budget then it will lost trust of foriegn lenders including friendly countries being a irresponsible state.

 

Conclusion:

It is the need of the hour that government should increase its exports, gave incentives for increased foriegn remmitences, widen the tax collection net,especially imposition of taxes on agriculture sector, retailers and real estate sector.

Controlling  the bleeding of state owned enterprises,

Otherwise default is knocking at the door of Pakistan.