The Pakistan Muslim League-Nawaz (PML-N)-led coalition government is aiming to secure an International Monetary Fund (IMF) bailout of over $6 billion in the next three to four weeks. This announcement was made by the Minister of State for Finance, Revenue, and Power, Ali Pervaiz Malik, on June 22, 2022. The government presented a challenging budget on June 12, 2022, with the aim of winning IMF approval for a loan under the medium-term Extended Fund Facility (EFF) to prevent another economic crisis.
The budget includes increased taxes on the salaried class, changes in the tax regime for exporters, an increase in the petroleum levy to Rs70, and new taxes on the real estate sector, among other measures, to boost tax collection. Malik expressed optimism that the IMF staff-level agreement would be reached before the IMF board recess.
The size of the IMF package is expected to be more than $6 billion, according to Malik, though the IMF did not immediately respond to a request for comment. The IMF program is seen as crucial for ensuring macroeconomic stability, and Malik stated that the lender was satisfied with the revenue measures taken, based on their talks.
However, the budget reforms may lead to public anger, according to analysts, as they are seen as burdensome for the local economy. Economist Sakib Sherani stated that a quick deal with the IMF was necessary to avoid pressure on Pakistan’s foreign exchange reserves and currency, given the country’s maturing debt repayments and the effects of earlier capital and import controls. If the process takes longer, there may be a need to re-impose import and capital controls, which could lead to uncertainty and potentially a decline in the equity market rally.
