Pakistan is facing its highest inflation ever, reaching 36.5% year-on-year in April. Imran Khan, the Chairman of Pakistan Tehreek-e-Insaf (PTI) and former Prime Minister, has criticized the government’s handling of the financial crisis, calling them “fascist” and accusing them of trying to crush PTI. Khan also expressed concern about the dollarization of the economy and the lack of local and foreign investment, which could lead to GDP contraction and hyperinflation. He further criticized the Pakistani establishment for allowing the country to head towards a complete economic meltdown.
In response to the financial crisis, Finance Minister Ishaq Dar announced that Pakistan will share its upcoming budget details with the International Monetary Fund (IMF) in order to unlock stalled funds. However, analysts say hopes for a resumption of an IMF deal are diminishing, with a bailout programme agreed in 2019 set to expire on June 30. The IMF funding is crucial for Pakistan, which faces an acute balance of payments crisis and has seen its foreign reserves fall to cover barely a month of controlled imports. Pakistan’s economy has also slowed, with an estimated 0.29% GDP growth for 2022-2023.
The IMF’s $1.1 billion funding to Pakistan has been held up since November and Islamabad hosted an IMF mission in February to negotiate a series of fiscal policy measures to clear the 9th review. Pakistan had to complete a series of prior actions demanded by the IMF, which included reversing subsidies, raising energy and fuel prices, increasing its key policy rate, adopting a market-based exchange rate, arranging for external financing and raising over 170 billion rupees ($613 million) in new taxation. The fiscal adjustments have already fueled Pakistan’s highest ever inflation, which hit 36.5% year-on-year in April.
