Economic Respite!
Pakistan's primary surplus of PKR 417 billion surpasses the IMF target, setting the stage for a successful 10th review.
The State Bank of Pakistan, as well as the Ministry of Finance, feel confident about achieving monetary targets and maintaining fiscal discipline ahead of the IMF’s second review since the SBA in July 2023. As far as the financing requirement is concerned, Pakistan has a net requirement of USD 8 billion after rollovers and expected loans from China, Saudia Arabia, etc. Furthermore, the IMF’s nod could pave the way for releasing the second tranche of USD 700 million.
The IMF will surely be happy about the positive primary balance which has grown by 209% in the first quarter of FY24 on a year-on-year basis. The same goes for revenue targets and monetary targets. However, a worrying issue is emerging in Pakistan's finances: the growing gas circular debt, on top of the existing power circular debt. As per the latest data, it has reached PKR 2.1 trillion and will increase by around PKR 350-400 billion every year.
This is a potential reason for the recent gas price hikes. However, it is interesting to see OGRA and SNGPL recording profits every quarter while the country’s debts accumulate. As previously, it appears that the government is effectively handling the aspects of the IMF review that can be addressed through cash accounting while overlooking the underlying structural issues. Shifting financial burdens onto its citizens will not provide a conclusive solution to Pakistan's issues.
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