The next step for the coalition government is passing the federal budget which is likely to be presented on June 10. Amid the economic situation and the efforts being made to revive the IMF loan programme, there is no indication that it will provide any relief to the masses.
According to reports, the government had proposed the budget deficit target for the next fiscal year at Rs3.77 trillion, or 4.8% of the GDP. The government is set to sign a deal with IMF this month and will certainly introduce measures in the budget to honour the commitments made to the global financial institution.
The IMF wants Pakistan to take wide-raging steps to restore macroeconomic stability, suggesting the government needs to do a lot more than just hiking petrol prices. The removal of fuel subsidies was the primary precondition for reviving talks which the government accepted. Finance Minister Miftah Ismail expressed confidence the loan programme will be revived after the subsidies were removed. However, it turns out that Pakistan will have to take other steps before the deal is finalized which is unlikely before the budget is presented.
The government is also expected to reduce the drastically reduce development budget for next fiscal year. The budget has been proposed at Rs700 billion against the Rs900 billion last year. The Ministry of Planning has already issued budget ceilings to different divisions instructing to not make allocations for ongoing projects.
The government needs to raise revenue generation as well. The FBR’s revenue target is estimated at Rs7.2 billion which the government finds satisfactory. The Finance Ministry has proposed restoring the Petroleum Development Levy to raise another Rs450 billion, which means that petrol prices will rise increased even further.
Inflation has reached 13.76 percent, the highest in more than two years, due to rising transport and food prices, which increased by 31.77 percent and 26.37 percent respectively. Pakistan faces serious challenges such as high external deficits, exchange rate depreciation, declining foreign reserves and mounting political uncertainty.
It needs to be seen if the country can sustain the growth level achieved in the last fiscal year. Citizens who are already burdened by the economic challenges will certainly have low expectations for the next budget.
