Pakistan: IMF Criticizes Budget as Bailout Cutoff Looms

Facts

• On Thursday, the International Monetary Fund (IMF) criticized Pakistan's recently presented budget, a severe setback for the financially struggling country as it approaches a June 30 deadline when its bailout program will expire.¹
• The Pakistani government hoped the ₹14.4T ($51B) budget for 2023-24 unveiled last week could break a months-long deadlock with the IMF over reviving a stalled $7B lending program and allow the country to deflect a looming default.²
• Pakistan's foreign reserves are shrinking, and it reportedly doesn't have enough to cover one month's worth of imports. The country was expecting to meet the IMF's conditions to secure the next $1.1B tranche of the support package.³
• However, the IMF said the budget "misses an opportunity to broaden the tax base," alleging new tax expenditures proposed by the government "creates a damaging precedent."⁴
• The criticism from the global lender comes as the deadline for its board to review the release of a portion of the $2.5B pending funds under the 2019 Extended Fund Facility is due in two weeks.⁵
• With inflation spiking to 38% in May, Pakistan has turned to China — which is expected to roll over $2.3B worth of debt — to avoid immediate default.²

Sources: ¹Al Jazeera, ²FT, ³Reuters, ⁴Bloomberg, and ⁵NDTV.

Narratives

• Pro-establishment narrative, as provided by Aaj English TV. Pakistan's economy is on the brink. However, the chances of Pakistan meeting the IMF's conditions are low due to the severe political turmoil in the country. The South Asian country is at risk of defaulting on its debt obligations as its financing options beyond June are highly uncertain.
• Establishment-critical narrative, as provided by DAWN. Pakistan can't let itself be a hostage to the IMF and allow itself to be treated like the West's colony. The country will execute a contingency plan if the June 30 deadline is met without concessions, which includes working on rescheduling the bilateral external debt of over $27B next month and turning to China to come out of the global lender's clutches.

Predictions