Connect with us

Hi, what are you looking for?

Economy

Pakistan’s Budget Targets IMF Negotiations for New Programme: Moody’s Assessment

Pakistan’s Budget

Moody’s Ratings, a global credit rating agency, commented on Friday that Pakistan’s newly announced budget for fiscal year 2024-25 is likely to bolster Islamabad’s negotiations with the International Monetary Fund (IMF) for a new Extended Fund Facility (EFF).

The agency noted that the budget, presented by Finance Minister Muhammad Aurangzeb, aims for a modest 3.6% GDP growth and emphasizes fiscal consolidation through increased taxation.

According to Moody’s, the budget’s focus on fiscal discipline and revenue enhancement is crucial for Pakistan to secure financing from the IMF and other international partners, addressing the country’s external financing needs.

The agency highlighted that achieving sustained reform implementation will be pivotal for Pakistan to meet its budget targets and alleviate liquidity risks effectively.

However, Moody’s cautioned about potential challenges, particularly the risk of social unrest due to higher inflation resulting from increased taxes and anticipated adjustments in energy tariffs.

The agency also expressed concerns about the government’s ability to maintain strong electoral support for continuing difficult reforms.

Regarding fiscal specifics, the government aims to reduce the consolidated budget deficit to 5.9% of GDP in fiscal 2025, down from an estimated 7.4% in fiscal 2024, with a primary surplus projected at 2.0% of GDP. The budget forecasts a real GDP growth of 3.6% and headline inflation at 12%.

Moody’s observed that the budget heavily relies on revenue increases, with limited measures to control spending.

The government targets a significant rise in federal revenue to PKR 17.8 trillion, a 46% increase from the previous year, mainly through higher taxes on items such as cars, cement, steel, gas, and diesel. Revenue as a percentage of GDP is projected to increase to 14.3% in fiscal 2025 from 11.5% in fiscal 2024.

In terms of expenditures, the budget plans for a federal government outlay of PKR 18.9 trillion, up 25% year-on-year, driven largely by elevated interest payments and increased subsidies, particularly in the energy sector.

Moody’s underscored Pakistan’s significant debt servicing burden, with over half of its revenue allocated to debt interest payments, posing substantial risks to debt sustainability and limiting fiscal space for essential social spending and infrastructure development.

In conclusion, Moody’s assessment underscores the critical importance of Pakistan’s fiscal discipline and reform implementation in securing external financing and stabilizing its economic outlook amid ongoing challenges and high debt affordability risks.

Written By

I am a dynamic professional, specializing in Peace and Conflict Studies, Conflict Management and Resolution, and International Relations. My expertise is particularly focused on South Asian Conflicts and the intricacies of the Indian Ocean and Asia Pacific Politics. With my skills as a Content Writer, I serve as a bridge between academia and the public, translating complex global issues into accessible narratives. My passion for fostering understanding and cooperation on the national and international stage drives me to make meaningful contributions to peace and global discourse.

Health & Education

KARACHI: Under the guidelines of Chairman Sindh Healthcare Commission (SHCC) Dr. Khalid Hussain Shaikh, Board of Commissioners and CEO SHCC, Directorate of Anti-Quackery achieved...

Entertainment

ISLAMABAD: Pakistani actress Nadia Jamil has announced her intention to reveal the identity of a showbiz director who sexually harassed her. Speaking on a...

International

Dubai has recently unveiled its ambitious project to construct the longest public beach in the emirate. This endeavor aligns with the city’s vision to...

Entertainment

ISLAMABAD: Senior Pakistani actor Tauqeer Nasir has alleged that Bollywood megastar Shah Rukh Khan copied his work in one of his hit films without...