Pakistan on Wednesday began talks with the International Monetary Fund – meetings moved to Dubai after Osama bin Laden’s death – aimed at getting agreement on enough reforms in the coming budget to restart a halted IMF bailout loan. The two sides are expected to struggle to reach an accord on targets for the budget to cover the fiscal year that starts on July 1.
The talks are expected to last until May 17, and the budget is due to be unveiled on May 28. The talks come at a time when some US lawmakers have questioned whether Pakistan is serious about fighting militants and called for a suspension of American aid to Islamabad. The US support was pivotal to getting an agreement, in November 2008, on an $11 billion IMF loan to financially-strapped Pakistan. An official involved in the Dubai talks said the IMF wanted Pakistan to reduce its deficit by increasing revenue while cutting wasteful spending.
The budget deficit for the first nine months of the current fiscal year was 4.5 per cent of gross domestic product. The government has said it aims to keep the budget deficit to less than 5.5 per cent of GDP for the year, but analysts doubt that can be achieved. “Pakistani budgets have a huge lack of fairness in that some sectors are not taxed at all and some untargeted subsidies such as for electricity are yet to be eliminated,” said the official.
