ISLAMABAD: The recent budget heavily laden with taxes and the Supreme Court’s ruling on reserved seats have now steered the political spotlight towards the economy in Pakistan. This shift has raised concerns about the country’s ability to meet the strict conditions set by the International Monetary Fund (IMF) for a $7 billion loan, as reported by Dawn.

A senior researcher emphasized the importance of the government meeting the conditions for the IMF loan agreement, stating, “This will be a critical factor in determining whether the government can secure the USD 7 billion IMF loan. Nonetheless, I remain optimistic that the government will move forward with the deal regardless of the challenges.”

Analysts have revealed that the government is looking towards China for assistance in restructuring its substantial $28 billion debt. However, sources suggest that China may be hesitant to restructure these loans, fearing requests for similar debt restructuring from other nations like Sri Lanka.

Bankers and analysts have acknowledged the significant challenges faced by the country, with mounting political pressure to provide relief to the public. One senior banker expressed disappointment in the government’s failure to offer relief, pointing out the continuous increases in fuel and electricity prices that have worsened the situation.

While banks and the equity market are witnessing historic profits, other sectors like textiles are demanding tax reductions and price controls. Exporters are also unhappy with the new taxes imposed on their income. The annual inflation rate for FY24 stood at 23.4%, leading to a negative real interest rate of three per cent.

The country’s high cost of doing business has already resulted in economic contraction in FY23, with minimal growth of only 2.4% in FY24. Analysts predict that if the political climate remains unstable, substantial growth in FY25 is unlikely, which could result in increased unemployment and heightened political uncertainties. The IMF forecasts a 3.5% growth for FY25, while Fitch Ratings estimates 3.2%.

Faisal Mamsa, CEO of Tresmark, expressed optimism about the potential outcomes of the IMF deal, suggesting that it could unlock additional funding sources, stabilize the rupee, and strengthen foreign exchange reserves. However, he also raised concerns about the political and social challenges in Pakistan, which could hinder the successful implementation of IMF conditions.

Despite efforts for deals with countries like Saudi Arabia, UAE, and China, there has been limited progress, and no government entity privatization has been finalized. Mamsa noted that the current anti-poor budget may not be sustainable in the long run.