Pakistan has finally chalked out an agreement with International Monetary Fund (IMF) to bailout its failing economy, Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh announced on Sunday.
As per the deal, Pakistan will receive $6 Billion in a period of three years, in exchange Islamabad has agreed to reforms across sectors. The roadmap also implies that an addition 2-3 Billion USD may be offered by ADB or World Bank if the country is able to show significant movement towards fiscal discipline.
Pakistan’s promises include better taxation on rich, sales and disinvestment for the sick government owned enterprises, overall curtailment of subsidies and expenses.
The government of Pakistan estimates that beginning July 1, the new financial Year for the country, country will be able to find additional funds by bringing in higher taxes on energy supply to wealthy and with sales of some of the state-owned enterprises. The officials estimate that the circular-debt may be reduced to zero by Dec 2020.
As per the local press, Pakistan must lower its budget deficit to 0.6% of GDP next fiscal year the deficit of over 1.7% that the IMF expects for this year. To meet this goal, the government has to remove tax breaks worth about $2.5bn next year and to raise the price of gas and electricity.
While the PTI government has reiterated that there will be no new burden on the common man, its Railway Minister Sheikh Rashid Ahmed has raid that “that the price hike and unemployment in the country could threaten the sitting government, he said two years would be hard for the masses and they could be offered relief only after the national financial health improved”
The Chinese belt and road initiatives have significantly increased Pakistan’s import bills while accumulating debt. Under the Chinese scheme, Beijing has offered Islamabad over 53 Billion loans for its infrastructure projects with the majority of work is being done by Chinese contractors. In effect the Chinese policies ensured higher earnings by Chinese Companies in Pakistan while the Islamic country gathered debt – at least till the time infra structure projects started generating its own revenue. Power projects have been among the fisrt to see the light of the day, and will most likely be taxed to recover cost.
