Pakistan's Ambitious Budget Targets & IMF Bailout Hopes

The Pakistan government aims for a budget deficit of 6.9% of GDP and tax revenue of 13 trillion rupees, seeking to strengthen its case for a new IMF bailout deal. Despite economic challenges, recent stabilisation measures and falling inflation have created optimism about growth prospects.

Pakistan government will target a budget deficit of 6.9% of its GDP and total tax revenue of 13 trillion rupees in the fiscal year starting July 1, the country's finance minister said in his budget speech on Wednesday. Analysts expect the budget for the fiscal year to June 2025 to set ambitious fiscal targets as it looks to strengthen the case for a new bailout deal with the International Monetary Fund.

Its in economic review on Tuesday, the government said GDP would expand 2.4% in the current year, missing the budgeted target of 3.5%, despite revenues being up 30% on year, and the fiscal and current account deficits being under control. While Pakistan is expected to stick to fiscal prudence under a new IMF programme, growth is expected to stay constrained, said Abid Suleri of the Sustainable Development Policy Institute think tank.

"Many of the measures taken to achieve fiscal sustainability will impact growth negatively, at least in the near future," he added. Pakistan is in talks with the IMF for a loan estimated to range from $6 billion to $8 billion, as it seeks to avert a default for an economy growing at the slowest pace in the region.

But a recent economic uptick following stabilisation measures and falling inflation, as well as an interest rate cut by the central bank on Monday, have made the government optimistic about prospects for growth. The key policy rate could fall further this year and economic growth would continue to rise, Finance Minister Muhammad Aurangzeb had told reporters a day before presenting his first budget.