The IMF has asked cash-strapped Pakistan to freeze salaries of Government employees and adhere to the fiscal consolidation path by showing a nominal primary deficit in the new budget due to the unsustainable public debt that is set to hit 90 per cent of the total value of the national economy.
Pakistan is finding it hard to concede to the two demands but the IMF is insisting that the country should continue to follow the fiscal consolidation path due to the high and unsustainable public debt, the Express Tribune reported on Friday.
Owing to the prevailing tight fiscal situation, growing public debt and Pakistan’s decision to seek debt relief from G-20 countries.
The International Monetary Fund has asked Islamabad to freeze salaries of Government employees, the daily reported, citing sources in the Ministry of Finance.
However, the Government is resisting the demand due to high inflation that has eroded people’s real income. Nonetheless, it is inclined to abolish over 67,000 posts that have remained vacant for over one year and is also ready to further squeeze current expenditures including a ban on purchase of vehicles.
The IMF’s key demand, which was also the reason for seeking to freeze the salaries, was that the government should announce a primary budget deficit target – total deficit excluding interest payments – of only Rs 184 billion or 0.4 per cent of gross domestic product (GDP).
Pakistan has its own reasons for resisting the IMF’s demands as it does not see a significant jump in revenue collection in the next fiscal year due to the prevailing economic conditions.
The Government is also inclined to give a raise in salaries due to high inflation that has eroded the real income of people, the daily reported.