Finance Minister Ishaq Dar Saturday admitted that his government was working on a “Plan-B” if the International Monetary Fund (IMF) does not release the pending loan for Pakistan — which is much-needed as the nation faces a possible default on external payments.
“Plan-B is always there: self-reliance and standing on your own feet […] we cannot talk about it much in public. But, Insha’Allah, Pakistan will not default,” the finance minister said during his post-budget press conference.
The cash-strapped country, with reserves to barely meet a month’s worth of imports, is undertaking steps to secure a $1.1 billion loan, part of a $6.5 billion IMF bailout package, which has been delayed since November, with more than 100 days gone since the last staff-level mission to Pakistan, the longest such delay since at least 2008.
In light of an absence of a bailout programme, securing external financing will be an uphill task for Pakistan as bilateral loans were also conditioned to the IMF’s loan, and experts fear that the nation might not be able to meet its external debt repayments.
“Pakistan, as I have said, will not default. Those who keep insisting that Pakistan will default are responsible for this mess. They are basically behind these issues. They are partners in this crime,” he said in an apparent reference to former finance minister Miftah Ismail.
The cash-strapped government unveiled a Rs14.5 trillion (around $50.5 billion) budget Friday, with over half set aside to service 7.3 trillion rupees of debt.
A balance-of-payments crisis has struck Pakistan’s economy as it attempts to service crippling external debt, while months of political chaos have scared off potential foreign investment.
About 950 billion rupees was earmarked for vote-winning development projects ahead of a general election later this year, while other populist measures include civil service pay rises of up to 35%, and a 17.5% increase for state pensions.
Pakistan is eyeing a gross domestic product (GDP) growth of 3.5%, expecting inflation at 21%, and targeting a fiscal deficit of 6.54% of GDP for the 2023-24 fiscal year, slightly below the current year’s revised estimate of 7%.
Moreover, the finance minister said that if the budget targets are met, the country’s economy will grow.
“If there is growth, then the wheel of the country will turn smoothly,” the minister said.