Islamabad: record spending and more debt despite default risk
Civil servants' salaries and military spending up to 13% in new budget submitted to parliament by Sharif government. Objectives: growth at 3.5 percent and inflation to be "contained" at 21%. Curcial disbursement of the latest tranche of aid from the International Monetary Fund in a country where almost all revenue today goes to cover interest on loans. Meanwhile, Imran Khan has been effectively banned from local news outlets.
Islamabad (AsiaNews) - A financial maneuver with some subsidies, increased civil servants' salaries and military spending, but no answers to Pakistan's debt crisis. On the contrary: by borrowing an additional 2,500 billion rupees (about 8 billion euros), with the goal (all to be verified) of still containing the debt-to-GDP ratio at 6.54 percent. In any case, the amount is well above the 4 percent that was required by the International Monetary Fund among the conditions for disbursing the last tranche of the bailout fund already launched in 2019.
In Pakistan where the political crisis is intertwined with the economic one-with the country remaining steadily on the brink of default in the shadow of the clash over Imran Khan-the passage of the budget presentation for the 2023/2024 fiscal year by Shehbaz Sharif's government was highly anticipated.
Finance Minister Ishaq Dar announced the measures that will attempt to hold together the impossible: the austerity budget demanded by the IMF and the populist measures of an executive in a consensus crisis just months away from the crucial general elections that by law are supposed to be held in November.
Dar has presented a budget in which almost all revenues will go to cover interest on existing debt. He promised not to raise taxes, but at the same time announced a 53 percent increase in current spending over last year's budget.
Measures include 30 percent increases in civil servants' salaries and--at a time when the support of the military is crucial--an increase in military spending, which will come to make up 13 percent of the budget.
The growth target is set at 3.5 percent: 5 percent was indicated last year, but in fact the country -- which also had to deal with the flood disaster this summer -- is stuck at 0.3 percent. As for inflation, the Sharif government's goal is to "contain" it to 21 percent: currently the annual rate is at 28.2 percent, but in May price growth reached as high as 38 percent.
In the face of these numbers, the judgment of the International Monetary Fund will be crucial: it is crucial for Islamabad to be able to receive as soon as possible at least part of the 2.3 billion euros not yet disbursed from the bailout fund allocated in 2019 and due to expire at the end of this month. Without the disbursement of this aid, default is just around the corner. But it will also need to be seen at what interest rates Islamabad will be able to obtain the new loans under the maneuver.
Meanwhile, the level of confrontation with Imran Khan and his Pakistan Tehreek-e Insaf party remains high. In recent days, the former Pakistani prime minister was granted bail Thursday by the Islamabad High Court on a new charge naming him for the killing of a lawyer, Abdul Razzaq Shar, who had accused him of high treason.
Meanwhile, the media regulator has sent a directive to Pakistani news channels in which, mentioning the May 9 clashes, it enjoins them not to give airtime "to individuals who spread hate speech." Imran Khan is not specifically mentioned, but for the past week he has effectively disappeared from the news.
Photo: Flickr/Peretz Partensky