The International Monetary Fund (IMF) has urged Pakistan to freeze the salaries of government employees and follow the path of fiscal consolidation by showing a nominal primary deficit in the new budget.
The main demand from the IMF, which was also the reason it tried to freeze salaries, was that the government should announce a primary budget deficit target – total deficit excluding interest payments – of only Rs184 billion or 0.4% of gross domestic product (GDP).
Owing to the prevailing tight fiscal situation, growing public debt and Pakistan’s decision to seek debt relief from G20 countries, the IMF was asking Islamabad to freeze salaries of government employees, the sources said.
However, the government is resisting the demand due to high inflation that has eroded people’s real income.
Nonetheless, it is inclined to abolish over 67,000 posts that have remained vacant for over one year and is also ready to further squeeze current expenditures including a ban on purchase of vehicles.
The Pakistan government is set to unveil the budget on June 12.
