Pakistan in Dire Economic Crisis as IMF Rejects Revised CDMP
Pakistan is facing a dire economic crisis as it grapples with a balance of payments crisis, external debt, political chaos and a deteriorating security situation. International Monetary Fund (IMF) delegation is visiting the country for discussions on the ninth review of a $7 billion loan programme, and Prime Minister Shehbaz Sharif said that the IMF was giving a “very tough time” to Finance Minister Ishaq Dar and his team.
The IMF has identified a breach worth Rs 2 trillion in budgetary estimates for the fiscal year 2022-23, warning that the primary and budget deficits could escalate with a massive margin. The IMF is giving Pakistan a difficult time in ongoing bailout negotiations and has called on the Pakistan government to increase the electricity tariff in the range of Pakistani Rupees (PKR) 11-12.50 per unit to restrict the additional subsidy at PKR 335 billion for the current fiscal year.
The IMF has called the revised Circular Debt Management Plan (CDMP) “unrealistic”, which is made on the basis of certain wrong assumptions. The government shared its revised CDMP with the IMF high-ups and demonstrated that the government needed an additional subsidy of Rs 675 billion despite increasing the power tariff in the range of PKR 7 per unit through quarterly tariff adjustment in the first two quarters of 2023 and PKR 1.64 for the third quarter from June to August. The government increased petrol and diesel prices by Rs 35 per litre with immediate effect.
Yesterday, Prime Minister Shehbaz Sharif noted that Pakistan was experiencing economic and financial hardships and had requested the IMF's assistance to get through these difficult times. He said that the government would have to agree to conditions that were “beyond imagination”. The report noted that people have been engaging in rampant theft of wheat and pulses due to inflation, and that flour is being taken from storage areas in order to be sold at a higher price, without regard to the starving populace.
The IMF review mission has rejected Pakistan’s revised Circular Debt Management Plan (CDMP). It has called on the Pakistan government to increase the electricity tariff in the range of Pakistani Rupees (PKR) 11-12.50 per unit to restrict the additional subsidy at PKR 335 billion for the current fiscal year.
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