Islamabad: The International Monetary Fund (IMF) mission is focusing on Pakistan’s financial framework for the ongoing fiscal year 2023-24 to reduce the basic deficit to $ 3 billion stand Bai Arrangements (SBA) reported The News on Monday.
The IMF has nothing to do with the overall growing fiscal deficit due to the provision of Rs 1 trillion in rising debt for the current financial year. The government plans to put a 7. 7.3 trillion lid on the debt service bill, but the IMF predicts it will reach 8.3 by the end of June 2024 Can keep balloons up to trillion dollars.
The basic surplus means that the deficit will be calculated excluding the loan service in the form of principal and markup amount requirement on domestic and foreign loans.
The IMF review mission is currently in Pakistan to complete the first review under the $ 3 billion loan program and is likely to release the second installment of $ 700 million December 2023. This installment will pass if both parties are eligible to attack the staff level agreement at the end of the negotiations.
Pakistan and IMF teams are currently negotiating at the technical level while policy level talks will take place next week from November 13-16.
By deferring key expenditures on subsidies and development expenditures, the government has achieved a gross fiscal deficit within the planned limits of 0.9% of GDP for the current fiscal year. The initial surplus has been achieved for the first quarter which has been achieved with the postponement of some spending heads.
The government has released a subsidy of only 2.5 2.5 billion in the first quarter out of Rs 1.064 billion allocated for the current financial year. For the Public Sector Development Program (PSDP), the government has used Rs. 41.9 billion out of only Rs. 950 billion.
The adjournment shows that the government, with the decision ، Succeeded in limiting the gross deficit and achieving basic surplus targets to please the IMF.
“ You should commend the government for turning the basic deficit into a surplus ، ” A government official who spoke to The News on condition of anonymity.
When reminded that this was achieved by cutting subsidies and curbing development spending, the official said: “ What other choice is available to this caretaker government? The only possibility was to better manage spending under the IMF program to align the underlying deficit in surplus mode۔ ”
Under the SBA, Pakistan has demanded a total fiscal deficit of 6.5% of GDP for the current fiscal year ، Which is equivalent to Rs. 6.9 trillion for the current financial year. The federal government’s budget deficit was estimated at 7% Of GDP or Rs 7.5 trillion but it was assumed that the provinces had to get more than Rs 600 billion in revenue after which the country’s total financial deficit was reduced Was to be limited to 6.5% of GDP.
‘Financial management is the key to deficit’
Dr. Khakan Najib, a former economic adviser to the Ministry of Finance, said that managing Pakistan’s fiscal deficit is key because the government needs to meet its borrowing needs The new currency has to be printed to cover its deficit.
He said it increases the supply of money to the economy and creates inflationary pressures ، He added that deficit financing also increases the government’s dependence on external resources.
The economist said the government’s borrowing plan crowded the private sector and hurt growth ، And added that excessive deficits need to increase the financial burden for future generations. He suggested that Pakistan re-profile its debt ، Extensive tax measures need to be introduced to reform spending and control large fiscal deficits.
Dr. Khakan explained that the basic deficit is the same amount that the federal government needs to borrow to cover all expenses other than debt and interest payments. In the first quarter of fiscal year 2024, spending on subsidies and growth has helped show lower fiscal deficits and basic surpluses.
The need for serious repairs to Pakistan’s budget has been highlighted by the fact that the federal government’s net income receipts, In the first quarter of the financial year 2024, only Rs. 26 billion was exceeded after the transfer to the provincial governments to cover all other expenses ، They came to this conclusion۔
