Pakistan budget unveils harsh cuts and reform measures to gain renewed IMF support

Pakistan budget unveils harsh cuts and reform measures to gain renewed IMF support

Pakistan’s government will unveil its budget for the 2019-20 fiscal year today. This year’s budget will reflect the troubling state

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Photo: Reuters

Pakistan’s government will unveil its budget for the 2019-20 fiscal year today.

This year’s budget will reflect the troubling state of Pakistan’s economy, with major government expenditure cuts and tax reform measures focused on improving tax collection expected. Due to the country’s soaring current account deficit, Pakistan and the International Monetary Fund reached a preliminary agreement on Sunday for a $6 billion bailout, Pakistan’s twelfth since 1980.

The most surprising element of today’s budget will be a cut to military spending. Pakistan’s military is an autonomous and powerful entity in Pakistani politics, especially with security and foreign policy formulation. Just last year Pakistan’s military had its budget hiked by 20% to $15 billion—around 4% of GDP. The move is doubly surprising as it comes only months after a tense standoff with India earlier this year.

While the austerity measures are necessary to secure the sustainability of Pakistan’s economy in the long-term, they will put Prime Minister Imran Khan in a precarious position. By accepting a bailout, the PM has already broken a campaign promise. The general unpopularity of austerity measures will also only be accentuated by persistently high prices that are unlikely to fall anytime soon.

While the military signed off on the cuts this time, they are unlikely to do so again in the future and will expect Mr Khan to revive the stagnating economy. However a quick recovery is unlikely, and could cause Mr Khan to lose the military’s favour, making it more difficult for him to govern.

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