ISLAMABAD: As it prepares to begin a second round of re-negotiations for reviving the Extended Funding Facility (EFF) programme, the Pakistan government has begun to change fast its economic policies and slash fuel subsidies, along with an increase in per unit electricity prices, to meet the criteria of the International Monetary Fund (IMF).
The government has recently proposed to the IMF a budget deficit objective of 4.8 percent of the country's overall economic size for the coming fiscal year. The offer is part of the IMF and global lenders' suggested economic remedies and policy changes for Pakistan, which include further adjustment through a combination of spending cuts and increased revenue mobilisation.
The talks between Pakistan and the IMF will set the tone and provide clarity for the fiscal year 2022-23 budget, which will be debated this week with the goal of reaching an agreement with the Fund by June.
While Pakistan hopes to persuade international financiers of its projected aims, the coalition government is up against a number of obstacles in its efforts to restore the country's credibility. This is in response to earlier false promises made by the previous government in order to gain lenders' trust and obtain concessions on the financial aid programme.
"During the inclusive Doha talks, the government requested a budget deficit target of Rs.3.77 trillion, or 4.8 percent of GDP, for the next fiscal year," a person familiar with the Doha talks between Pakistan and the IMF said.
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