Mini-Budget Likely If IMF Remains Unsatisfied

The International Monetary Fund (IMF) has warned that Pakistan might need to consider a mini-budget if revenue targets are not met, sources told ProPakistani. While the lender did not comment on the finalization of a new bailout package, they urged that the success of the current program was critical. Another source told ProPakistani that the IMF has blamed contracts with Independent Power Producers (IPPs) for causing economic challenges. It urged the federal government to prioritize improving the efficiency of electricity distribution companies and reducing electricity costs for all categories of consumers. The Washington-based lender has made it clear that implementation of an agricultural tax hinges on cooperation between provincial and federal governments and will only be considered once it becomes law. Also, privatization decisions regarding Pakistan International Airlines (PIA) and power distribution companies will be some of the major conditions for the new bailout program, one of the sources said. The IMF stressed that Pakistan’s government must avoid making mistakes that could derail budgetary targets. They further said the PKR/$ will continue to be determined by market forces. IMF wants the federal government to satisfy all its conditions but didn’t say whether a change in government was necessary at the time. The lender has so far refrained from commenting on political matters. Sources said the lender wants Pakistan to carefully address political challenges independently. IMF has acknowledged that efforts are being made to enhance human capital, tackle inflation, and improve tax machinery efficiency. Every sector must contribute to better taxation, meanwhile, the lender will work on a timeline for approving a new package. The lender said it is closely monitoring policy rates currently implemented across all banking channels. It further said cooperation between the federation and provinces is crucial for establishing a new tax structure, the source added.