Business & Economy

Pakistan announces austerity measures seeking IMF loan

Islamabad, Feb 22 (EFE).- Pakistan Prime Minister Shehbaz Sharif on Wednesday announced a slew of austerity measures in government expenditure as the nation seeks to secure a fresh loan from the International Monetary Fund amid an economic crisis.

Pakistan is eyeing a staff-level agreement with the IMF to unlock the next tranche worth $1.2 billion this week. Talks between Pakistan and the international lender ended in Islamabad without any outcome earlier this month.

The cash-strapped country is struggling to meet tough IMF conditions, including raising general sales tax on goods and services from 17 percent to 18 percent and increasing prices of different goods and edibles, to generate 170 billion rupees or $630 million during the fiscal year ending June.

The National Assembly, or lower house of the parliament, on Monday passed the Finance (Supplementary) Bill, 2023, to amend certain laws related to taxes and duties to meet the last prior demands of the IMF.

The bill is expected to be passed by the Senate, or upper house, during the week for it to come into effect.

Announcing the austerity measures, Sharif said that the current expenditure of ministries, including the foreign ministry, departments and sub-departments, would be reduced by 15 per cent.

However, he clarified that the cut would not affect salaries and allowances of staff deputed on foreign missions.

He added that ministers, state ministers and his special advisers had decided to forego their salaries and perks, and that all ministers would now pay their own telephone, electricity, water and gas bills.

“All luxury cars being used by cabinet members are being revoked and will be auctioned,” he said, adding that “where needed, ministers will be provided only one car for security.”

There are more than 80 ministers and advisers in Sharif’s cabinet. He said that by adopting the measures, the country would save 200 billion rupees (around $740 million).

Sharif said that federal ministers would also travel in economy class when undertaking domestic or foreign tours, government officials would only make “obligatory visits,” and cabinet members would not stay in five-star hotels during their foreign trips.

Pakistan is currently facing severe economic challenges, including a worsening balance of payment crisis, shrinking foreign exchange reserves and higher inflation rate.

Inflation jumped to a 48-year high in January to 27.6 percent, the highest since May 1975, compared to the same period last year.

Pakistan, facing a shortage of foreign reserves, secured a $6 billion IMF bailout in 2019, which was increased by another $1 billion last year following historic floods in the country.

The IMF had suspended disbursements in November last year due to government’s failure to meet its demands. EFE


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