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A BROAD outline of the next budget has emerged after recent talks between the government and the IMF. And there is little that suggests a departure from the stabilisation-heavy approach that defines economic management under the current IMF programme. The understanding between the government and the IMF reinforces what was already anticipated.
Fiscal consolidation driven by tight monetary policy and revenue extraction will remain the central pillar of the next budget. Growth, investment and employment generation will continue to take a back seat. The commitment to maintain a primary surplus of 2pc of GDP has effectively been declared untouchable. Combined with an “appropriately tight” monetary stance, higher petroleum levy collections, fresh tax measures and reduced subsidies, the next budget appears to be another exercise in balancing numbers than reviving growth.
Simply put, it means continued compression of domestic demand, suppression of industrial expansion and reduced fiscal space for development investment. The Gulf conflict has provided another excuse for maintaining the stabilisation momentum. The IMF has explicitly referred to the impact of regional disruptions in discussions with Pakistan.
