Pakistan's Economic Outlook: Budgets and Reforms in Focus

The Sindh government is gearing up to unveil its budget for the fiscal year 2024-2025 on June 14, with Chief Minister Murad Ali Shah set to present the budget. The proposed budget includes a 10% to 15% increase in government employee salaries and a focus on funding ongoing development projects rather than introducing new schemes.

On the other hand, the federal government is preparing to announce its budget for the upcoming financial year, 2024-2025. The budget aims to meet ambitious fiscal targets to strengthen negotiations for a new bailout deal with the International Monetary Fund (IMF). Despite missing the current year's growth target of 3.5%, Pakistan has witnessed a 30% rise in revenues and successfully managed fiscal and current account deficits.

Pakistan is currently in talks with the IMF for a loan ranging from $6 billion to $8 billion to avert an economic default. Recent economic improvements, such as stabilisation measures and reduced inflation, have instilled confidence in the government regarding economic growth prospects. The Finance Minister foresees additional interest rate cuts and sustained economic growth in the coming year.

The upcoming budget will also address plans for proceeds from privatisation, with the government planning to divest a stake in its national airline after almost two decades. However, challenges persist in implementing reforms due to political pressures and concerns about potential protests from sectors like agriculture and retail, which are perceived to be undertaxed. Reductions in discretionary funds for Members of Parliament have strained political alliances and loyalties.

As the Sindh and federal governments prepare to announce their budgets, the focus remains on fiscal targets, economic growth, and reforms to stabilise the economy. The proposed salary increases for government employees and plans for privatisation signal potential changes in the economic landscape. Despite challenges, the government's efforts to secure a loan from the IMF and drive economic growth reflect a commitment to financial stability and progress.