IMF urges Pakistan to freeze all non-development expenditures

IMF urges Pakistan to freeze all non-development expenditures

Islamabad (Web Desk): The International Monetary Fund (IMF) has asked the government to bring about massive fiscal adjustments amounting to Rs1,150 billion to cut the budgetary deficit at 0.4 percent of the GDP.

The IMF is insisting that Pakistan should continue to follow the fiscal consolidation path due to a high and unsustainable public debt that is set to hit 90% of the total value of national economy.

The IMF staff, according to an official, in its recently held technical level parleys here in Islamabad, also recommended strict policies and warned Pakistani authorities regarding the country heading towards ‘unsustainable’ debt trap if the primary deficit was not curtailed from a projected negative 2.9% of the GDP in the post-COVID-19 scenario in the outgoing fiscal year 2019-20 to negative 0.4% of GDP for the next budget 2020-21.

Pakistan’s total debt and liabilities so far touched Rs 42,820 billion, equivalent to 98.2% of the GDP till the end of the third quarter (July-March) period of the current fiscal year so it’s heading towards 100% of GDP at a rapid speed.

The IMF prescription suggests that Islamabad requires massive fiscal adjustments of 2.5% of the GDP for bringing down its primary deficit from negative 2.9% of GDP to negative 0.4%, equivalent to almost Rs 1,150 billion in the next budget through different measures including the freezing of salaries and defence budget.

“When G20 countries can cut down salaries of their public sector employees, why can't Pakistan do it,” the IMF side raised the question before Pakistani side and argued that “charity begins at home” so the government must show its discipline before pursuing others and for creation of fiscal space for diverting resources towards combating COVID-19 pandemic.

Pakistani authorities have replied that the inflation remained in double-digits and freezing of salaries did not seem like a feasible option. The government said that inflation has impacted the salaried class the most and 10-15% increase in salaries and pensions was inevitable.