Finance Minister Shaukat Tarin, who negotiated the final tranche of the country’s current IMF loan, aims for a budget deficit of 5% to 5.25% of the gross domestic product (GDP) in the fiscal year beginning July 1, down from the current 6.1%, and for a boost in economic growth to 6% from 5%, reports Bloomberg.
In an interview, Tarin said, “I think this programme should be enough”, adding, “If we start generating 5%-6% balanced growth, which means sustainable growth, then I don’t think we need another IMF programme,” said Tarin.
The promise to an IMF-free future comes as the lender agreed this week to restart a $6 billion loan programme that had been halted since 2019 due to Pakistan’s failure to meet loan requirements, it reported.
Tarin said Prime Minister Imran Khan had been a vociferous critic of IMF bailouts, stating that the begging bowl needed to be broken if Pakistan was to earn international respect. On its approach to becoming self-sufficient in terms of IMF assistance, the country also favours bilateral loans or commercial borrowings that do not entail austerity requirements.
Tarin also stated in the interview that he intends to issue $1 billion in March through an ESG-compliant Eurobond, which would follow a similar amount of Sukuk last week.
According to the report, Tarin said the first step towards halting Pakistan’s boom-bust cycle was to improve exports. The central bank provided low-interest loans to manufacturers, and energy tariffs were brought in accordance with regional standards. Textile shipments – which account for more than half of total exports – are expected to increase 40% this year to a record $21 billion and further to $26 billion next year, according to PM Khan’s trade adviser.
Additionally, Pakistan intends to offer similar incentives to the technology sector in order to capitalise on a global wave of venture capital interest in startups. Tarin estimated that the measures would be presented in roughly a month.
Since his April 2021 appointment, Tarin has renegotiated several of the IMF’s financial terms, including a lower increase in utility costs and a lower tax mop-up than the lender had earlier demanded.
The government has implemented several of the structural prerequisites, including boosting the central bank’s authority and ending deficit monetization. Tarin, like his predecessors, has been unable to considerably expand Pakistan’s revenue base or sell loss-making state-owned enterprises, the report stated.
Tarin told Bloomberg that previous governments accepted IMF conditions in the short term, but when the programme ends, policymakers revert to profligacy. Rather than that, he said that the following budget would “control our expenses”
“We are trying to now take those steps, which are going to put this economy on an inclusive and sustainable growth path,” Tarin explained.
“Once it gathers momentum and is sustainable, then I think we will probably see 20-30 years of growth.”
