ISLAMABAD: Pakistan is facing challenge of unsustainable public debt and new government should reach an early agreement with International Monetary Fund (IMF) for long-term bailout package to continue difficult reforms, said outgoing interim Finance Minister Dr Shamshad Akhtar. In departing note in monthly economic outlook, Akhtar said that market confidence had been restored during past few months and as result the gross domestic product was expected to grow around 3 percent in second quarter of current fiscal year. In first quarter, the economic growth was 2.1 percent.

“At heart of economic challenges is unsustainable public debt position, with Pakistan in breach of Fiscal Responsibility and Debt Limitation Act (FRDL) since 2013,” she said. Although she claimed to have achieved fiscal consolidation, budget deficit in first half was 58 percent higher than comparative period of last year, which was reason for debt unsustainability. Akhtar said that it was imperative that new government completed last review of IMF programme that would lead to release of $ 1.2 billion loan tranche.

“Perhaps more important is that new government reaches an early agreement with IMF staff on new medium-term facility, providing an anchor to carry out difficult reforms,” she said. Pakistan’s debt has ballooned to Rs 81 trillion and it now spends on debt servicing an amount that is more than net federal income. Any future IMF programme should consider possibility of debt restructuring, according to independent analysts.

Published in The Daily National Courier, March, 02 2024

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