Pakistan, under IMF bailout, sets 4.8% GDP growth target

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ISLAMABAD — Pakistan, in talks with the IMF about its $6 billion bailout program, set a growth target at 4.8% of GDP for the 2021-22 financial year and a fiscal deficit target of 6.3% on Friday.

Finance Minister Shaukat Tarin included the goals as he set out Pakistan’s annual budget before parliament, with a total spending outlay of 8.4 trillion rupees ($53.93 billion).

Pakistan, which borders India, Afghanistan and Iran, surpassed growth projections in the 2020-21 financial year despite a third wave of COVID-19 infections, with GDP growth of 3.96%, against a target of 2.1%.

“We want to make sure of a growth rate of 6% to 7% in the next two to three years,” Tarin told members of parliament, including Prime Minister Imran Khan. “We have gotten successfully on the path from stabilization to growth.”

Pakistan’s economy contracted 0.47% in 2019-20.

Tarin’s speech was interrupted by opposition MPs protesting at the economic performance of Khan’s government.

Tarin said Pakistan would set a target of 5.8 trillion rupees ($37.24 billion) in revenue collection for the next financial year, with about 2 trillion rupees in non-tax revenue.

Pakistan is in talks with the IMF as part of the sixth review of a 39-month bailout program, which began in 2019.

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The revenue target has been a key topic and Tarin has said the IMF and the government debated ways to achieve the target, which is 23% higher than the current year’s expected collection.

The budget document shared with Reuters said one of the main objectives was to pursue the IMF program, even as Pakistan has said it is looking for the easing of some restructuring targets.

The budget also seeks to strike a “balance between fiscal deficits due to COVID-19 and boosting growth of the economy.”

Tarin said Pakistan’s economy had fared well despite a third wave of infections, which only subsided last month.

Pakistan has earmarked $1.1 billion for procuring COVID-19 vaccines, Tarin said, setting a target of inoculating 100 million of the country’s 220 million people by mid-2022.

It has administered 10,496,228 doses of vaccines so far, while registering a total of 938,737 infections and 21,576 COVID-19-related deaths.

DEBT DIFFICULTY

The fiscal deficit target was set at 6.3% of GDP, lower than the 7.1% expected in the outgoing year. With a narrow tax base, bringing this target down has long been a challenge in the face of ballooning debt payments.

Of Pakistan’s overall expenditure, 3 trillion rupees, or 35%, has been set aside for debt servicing, while defense services take up 1.3 trillion rupees, or 16.3% and less than half remains after these two elements .

Pakistan has set aside 900 billion rupees for development spending, which is up by 40% over the outgoing year, Tarin said.

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The budget document showed that the 3.99 trillion rupee deficit will be plugged by 1.2 trillion rupees in external financing and 2.4 trillion rupees in domestic financing, with the remainder from privatization proceeds.

Pakistan is making use of the G-20 debt service suspension initiative for 20 months from May 2020 to Dec 2021, which it says will help to defer debt servicing by around $3.7 billion.

The inflation target for 2021-22 has been set at 8%, with rising prices being a key concern for the government. ($1 = 155.7500 rupees) (Reporting by Asif Shahzad and Gibran Peshimam; Additional reporting by Charlotte Greenfield and Umar Farooq; Writing by Gibran Peshimam; Editing by Edmund Blair, Nick Macfie and Alexander Smith)