The federal budget 2024-25 will likely support Pakistan’s ongoing negotiations with the International Monetary Fund (IMF) for a new Extended Fund Facility (EFF) that will be crucial for the government to unlock financing from IMF and other bilateral and multilateral partners to meet its external financing needs, Moody’s Ratings said on Friday.
But the agency cautioned that a resurgence of social tensions on the back of the high cost of living (which may increase because of higher taxes and future adjustments to energy tariffs) could weigh on reform implementation.
“Moreover, risks that the coalition government may not have a sufficiently strong electoral mandate to continually implement difficult reforms remain,” it warned.
Moody’s said the budget targets fiscal consolidation via tax hikes and projected growth but sustained reform implementation will be pivotal for Pakistan to secure external financing.
Moody’s noted that the government’s revenue target of Rs. 17.8 trillion is 46 percent higher than the previous year, driven by a 40 percent higher taxation through new levies and economic growth.
The agency underscored the need for substantial fiscal discipline to address Pakistan’s debt sustainability concerns and ensure adequate funding for social programs and infrastructure.
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