Washington-based Institute of International Finance (IIF) sees Pakistan struggling to achieve its financial targets this year.
The country’s main hurdles lie in fiscal consolidation and reforms amidst a fragile coalition government and political turmoil due to reports of electoral fraud.
IIF mentioned Pakistan Peoples Party’s reluctance to support politically sensitive reforms has complicated negotiations with international institutions like the IMF. Pakistan’s history of incomplete government terms and numerous IMF programs has added to the uncertainty surrounding its financial future, the association said in a report.
Despite improvements in exchange rates, monetary policy, energy subsidies, and reforms in state-owned enterprises, the IIF warns that fiscal consolidation remains the biggest obstacle.
Pakistan’s public debt has risen from 55 percent to 79 percent of GDP over the past decade, with an estimated overall fiscal deficit of 8.1 percent of GDP and a primary deficit of 0.2 percent of GDP.
The IIF said there was political instability, with concerns over the government’s ability to meet tax revenue targets and implement necessary expenditure cuts. It anticipated tensions between ex-Prime Minister Imran Khan and the establishment to escalate which would cause more political turmoil.
The IIF emphasized the importance of securing a new IMF program for Pakistan, especially as other sources of financing, such as Saudi Arabia, the UAE, and China, are contingent on IMF involvement.
