IMF Recommends Pakistan To Freeze Salaries Of ‘Govt Employees’ Including Pakistan Army?

Pakistani government employees, which may also include the Army may witness a freeze in their salaries as the IMF has urged the Pakistan government to freeze salaries of government employees along with other changes in the budget that is soon to be unveiled.

The International Monetary Fund (IMF) that works towards fostering global monetary cooperation along with reducing poverty around the world has urged Pakistan to freeze salaries of government employees.

As reported by Pakistan’s Finance Ministry sources, the organization has asked Pakistan to adhere to the fiscal consolidation path by showing a nominal primary deficit in the new budget that is scheduled to be announced on June 12.

Due to a high and unsustainable public debt that is expected to reach 90 percent of the total value of the national economy, the IMF has called upon Pakistan to continue following the fiscal consolidation path.

According to reports – “The outbreak of the deadly novel coronavirus has exposed vulnerabilities of Pakistan’s economy that had already been struggling owing to weak economic foundations that caused fiscal and current account deficit crisis after every four to five years.”

It is estimated that about 67,000 posts that have remained vacant for over one year are set to be abolished.

It is believed that the IMF has insisted on Islamabad to freeze salaries due to the current tightened fiscal situation along with growing public debt and the country’s ultimate decision to seek debt relief from G20 countries.

However, Pakistan’s media reports that the government is resisting the demand due to high inflation that has eroded people’s real income.

“Pakistan has its own reasons for resisting the IMF’s demands as it does not see a significant jump in revenue collection in the next fiscal year due to the prevailing economic conditions. The government is also inclined to give a raise in salaries due to the high inflation that has eroded the real income of people.”

Earlier on 31 May, it was reported that Pakistan’s estimated $15 billion borrowings will be the highest loans to be taken by the country in a single year which also highlights challenges that every government faced due to the deepening debt trap.

 It is estimated that “because of inability to enhance non-debt creating inflows, Pakistan’s $12 billion gross official foreign currency reserves held by the State Bank of Pakistan (SBP) are largely the product of borrowings – a phenomenon that was also common in the Pakistan Muslim League-Nawaz (PML-N) era,” writes Pakistan’s media.

Banking experts from Pakistan expect to receive about $2.1 billion from the IMF in the next fiscal year, which depends on the successful completion of quarterly reviews. Pakistan had successfully completed the first review last year, following which, the IMF dispatched the second tranche of $452 million under the 39-month bailout program, which was signed on July 1, 2019.

So far, this year the IMF has already assisted Pakistan with $2.8 billion, including $1.4 billion emergency Covid-19 assistance.