The International Monetary Fund (IMF) has asked the Pakistani government to bring about major fiscal reforms in the amount of Rs 1,150 billion to reduce the budget deficit to 0.4 percent of the GDP.

International body officials have held an important meeting in the federal capital Islamabad, according to details. Officials warned the Pakistani government that the country is heading towards a ‘unsustainable’ debt trap if the primary deficit did not decrease from a projected negative 2.9% of GDP in the post-COVID-19 scenario in the 2019-20 fiscal year to negative 0.4 % of GDP in the next budge of 2020-21.

At present, Pakistan’s total debt and liabilities have reached Rs 42.820 billion, equal to 98.2 percent of GDP until the end of the current fiscal year’s third quarter (July-March) period, so it is going towards 100 percent of GDP at a rapid pace.

The prescription of the IMF suggests that Islamabad requires massive fiscal adjustments of 2.5 percent of GDP to reduce its primary deficit from negative 2.9 percent of GDP to negative 0.4 percent, which is equivalent to nearly Rs 1.150 billion in the next budget through various measures including wage freezing and defense budget.

However, in response to International Monetary Fund officials, the Pakistani authorities said that the country’s inflation remained in double-digits, and the freezing of wages did not seem like a realistic choice. The government said inflation had the most impact on the wage class, and wage and pension increases of 10-15 percent were inevitable.

It should be noted that this meeting took place just days before the government announced its fiscal budget.