According to reports, the International Monetary Fund (IMF) intends to prohibit Pakistan from borrowing more from China.
The IMF’s recommendations are likely to jeopardize Islamabad’s plan to seek PKR 7.9 billion from China for China Pakistan Economic Corridor (CPEC) projects.
Driving Pakistan’s economy with external doles is unsustainable, and structural reforms are desperately needed. According to the Financial Post, the IMF has raised concerns about Pakistan’s Chinese loans and arbitrary high payments made to Chinese independent power producers (IPP), and has suggested that Islamabad renegotiate its energy agreements with Beijing.
Pakistan is obligated to pay more than PRs. 350 billion in power due to the presence of multiple Chinese IPPs in the country. The IMF’s demand follows Beijing’s rejection of modifying the terms of agreements for CPEC projects.
A significant portion of the budget expenditure PKR 3,950 billion (USD 19.5 billion) – more than 40% of total federal budget expenditure (PKR 9,502 billion; USD 47 billion) is allocated for debt servicing, representing a 29.1% increase over the previous year.
Pakistan’s economy faces a difficult task because the budget for FY 2022-23 fails to address the key structural issues that are impeding the country’s revival.
The country’s economy is already beleaguered by a massive deficit, and inflation is spiraling out of control, raising the prospect of a default. With the IMF deal hanging in the balance, the authorities should have attempted bold structural reforms, but the budget fell short, according to the media portal.
Pakistan Finance Minister Miftah Ismail’s USD 47 billion federal budget for the coming fiscal year has done very little to address Islamabad’s fundamental economic problems.
As Pakistan’s traditional partners have faltered from bailing the country out of this huge debt, its only hope is on the revival of the Extended Fund Facility of the IMF. However, the IMF expressed its dissatisfaction and unhappiness over the measures in the budget to meet its conditionality to revive the USD 6 billion funding.