IMF blasts Pakistan budget as deadline for loan deal looms

THE International Monetary Fund (IMF) criticised the Pakistan government’s budget as insufficient to meet the goals of its aid programme, a sign that the two sides will likely fail to meet a deadline this month to unlock aid payments.

The tax policies in the new budget, unveiled last week, “misses an opportunity to broaden the tax base in a more progressive way, and the long list of new tax expenditures reduces further the fairness of the tax system”, Esther Perez Ruiz, the IMF’s resident representative in Pakistan, said in a statement.

“The new tax amnesty runs against programme’s conditionality and governance agenda and creates a damaging precedent,” she added.

The criticism from the Washington-based lender comes as Jul 31 deadline nears for the latest review of a US$6.7 billion loan programme. Payments have been on hold as the IMF seeks stronger fiscal policies, which are proving politically challenging with elections expected later this year.

More importantly, a deal with the IMF would unlock billions in financing assistance from other countries, including Saudi Arabia and the United Arab Emirates, which Pakistan needs to service its debts. The South Asian nation faces about US$23 billion of external repayments for the fiscal year from Jul 1.

Pakistan dollar notes were little changed in New York afternoon trading. Moody’s Investors Service said this week that Pakistan is increasingly at risk of failing to restart the IMF programme, raising the possibilities of a default.

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Earlier this month, the government of Prime Minister Shehbaz Sharif said it had lined up US$4 billion in financing guarantees, short of the US$6 billion required by the IMF. BLOOMBERG