[News] IMF bailout terms hang heavy over new Shehbaz govt’s first federal budget

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(IMF) dominated the political discourse on Wednesday as the new Shehbaz Sharif-led govt presented its first federal budget, worth a projected 18.5 trillion rupees, in the National Assembly. Last month, IMF linked any future deal with Islamabad to the passage of the 2024-25 budget in parliament.Pakistan has been in talks with the IMF for a loan estimated to range from $6 billion to $8 billion as it seeks to avert a default in the face of its economy growing the slowest among all countries of the region. Islamabad entered into a $6.5 billion three-year agreement with IMF in 2019. It received a final $3 billion under a standby arrangement last year, just before the agreement was to expire. The finance ministry and IMF were reportedly locked in last-minute talks as the global lender presented some more tough conditions last week to include in the budget. A ministry official said the IMF's key demands include a higher tax revenue target, withdrawal of subsidies, taxes on the agriculture sector, increased taxes and levies on the power, gas, and oil sectors, privatisation of sick govt organisations and units, and improved administration. Despite Pakistan's aggressive pursuit of economic diplomacy to improve trade and investment ties with other nations, finance minister Muhammad Aurangzeb, who presented the budget in parliament, explicitly said there were no alternatives to IMF under the current circumstances. "As you all know, I have been in this role for about three to three and a half months," he said at a presser. "But even when I was in the private sector, I was very loud and clear that we should go into the IMF programme because there is no plan B. If there were a plan B, the IMF would not be called the lender of last resort. There's a reason for that." Even with depleted foreign reserves and an economic crisis, the govt allocated 2,100 billion rupees to defence in the federal budget, a 19% increase over the previous year. IMF hasn't demanded cuts in defence spending so far. A day earlier, the govt unveiled the Pakistan Economic Survey 2023-24, which showed that the economy failed to meet most of its targets set in the previous budget. The finance minister also addressed IMF's insistence on ending tax exemptions for a fresh loan. "There are no sacred cows. Everyone has to contribute to this economy. The country can only be run with taxes. This is a basic principle," he said.

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