The previous article had highlighted the problems with the macroeconomic projections by the IMF in the Staff Report of September 2024 on the new Extended Fund Facility for Pakistan for 37 months.

The focus of this article is on the IMF projections of the general government budget from 2024-25 to 2026-27.

There is initially a need to emphasize that these public finance projections are truly ambitious and challenging for the federal and provincial governments in Pakistan.

Problem with IMF projections

Achievement of these targets will greatly stabilize the economy and facilitate faster growth with lower inflation. These projections/targets have been finalized with concurrence from the Pakistani side in the loan negotiations.

The ambitious nature of these projections can be judged by the sharp decline expected in the budget deficit. It was 6.8 percent of the GDP in 2023-24, which already represented significant improvement from the deficit of 7.8 percent of the GDP in 2022-23.

The expectation is that the year, 2024-25, will close with a deficit of 6.1 percent of GDP in 2024-25. This is projected to fall to 6.0 percent of the GDP in 2025-26 and to only 4.7 percent of the GDP in 2026-27. The last time Pakistan had a fiscal deficit of below 5 percent of the GDP was as far back as 2004-05. Simultaneously, the expectation is that the primary balance will be 2 percent of the GDP in 2024-25 and remain at, more or less, this level in 2025-26 and........

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