Monitoring Desk: While Consumer Price Index in Pakistan crossed 27.5% by breaking the record of half a century, inflation is touching 33% in the first half of 2023.
With no deal with International Monetary Fund (IMF) for a bailout, a senior economist with Moody’s Analytics claimed that an IMF bailout alone isn’t going to be enough to get the economy back on track in Pakistan. What the economy really needs is persistent and sound economic management,” senior economist Katrina Ell said in an interview on Wednesday.
Without going for imposing direct taxes or cutting the salary packages of government officials, the Pakistan government is keeping to impose indirect taxes by enhancing the price of energy (gas, electricity, and vehicular fuel). The of facing the burden of the economic meltdown is the daily wages of employees, private sector employees, farmers, and the poor class of the country. The average salary of a government official with 15 years of service is over one million rupees per month and the perks and privileges package s around Rs. 200,000 which does not include a hefty pension package.
A federal secretary enjoys a package of over 1.5 million rupees per month while salaries of high-grade officials in public corporations are over 3 to 4 million rupees per month. The government of Pakistan does not share salary and perk and privilege packages with civil and military bureaucrats and higher judiciary and their tax returns are inaccessible to people. The burden of the economic meltdown is being recovered through only indirect taxes and no change in perks and privileges of civil and military bureaucracy, parliamentarians and the judiciary has been announced.
It may be mentioned that an agreement on the ninth review of the program IMF would release over $1.1 billion of the total $2.5 billion pending as part of the current package agreed in 2019 which ends on June 30. The funds are crucial for the economy whose current foreign exchange reserves barely cover 18 days’ worth of imports.
The International Monetary Fund (IMF) has demanded an upfront big increase in interest rate, which can push the key rate to a new high. IMF had initially demanded a significant increase in the interest rate during the recently concluded staff-level visit. The Express Tribune reported that the State Bank of Pakistan was trying to convince the IMF to agree on a lower rate, but no rate could be finalized between both sides.
If the IMF’s demand is accepted, this will push the interest rate to the highest level of around 20%, breaking the previous record of 19.5% in October 1996.
The Federal government announced a mini-budget on February 16 for imposing new taxes of over Rs 170 billion to meet the understanding reached with the International Monetary Fund (IMF) for the Extended Fund Facility and the same day announced an increase of Rs 22.20 in petroleum products. Last week government withdrew subsidies for fuel to farmers and small industries.