The budget that was presented in the last few hours seeks to respond to the country’s economic challenges and obtain a new agreement with the financial entity to avoid default. Prime Minister Sharif also paid an official visit to Beijing in the hope of signing new economic cooperation treaties. But China’s response has been lukewarm.
Islamabad () – Pakistan’s Finance Minister, Ishaq Dar, will present today the budget for the 2024-2025 fiscal year to the National Assembly (Lower House of Parliament). The new financial plan seeks to respond to the country’s economic challenges while trying to obtain a new agreement with the International Monetary Fund, especially after Prime Minister Shahbaz Sharif’s visit to China, which concluded with the promise of investments below that Islamabad had expected.
Pakistan is mired in a serious economic crisis characterized by rising inflation, stagnant growth and heavy external debt. Yesterday the government announced that it had revised growth for the current year, moving from a target of 3.5% to 2.4%, despite revenues increasing by 30% on the previous year. Several other targets were also missed, although the agricultural sector recorded unprecedented growth, expanding by 6.25%.
Islamabad is (still) negotiating with the International Monetary Fund for a loan of between $6 billion and $8 billion to avoid economic default. Among the demands of the financial institution are the increase in tax revenues, the withdrawal of subsidies, the increase in taxes on the energy, gas and oil sectors, the privatization of structures in crisis and the improvement of administration. According to economist Sakib Sherani, the budget will adjust to the IMF’s demands, but he warned: “The real problem is compliance with fiscal austerity; it will be necessary to act prudently and put a stop to populism.”
From June 4 to 8, Pakistani Prime Minister Shehbaz Sharif was in Beijing seeking new investments through new agreements in energy and infrastructure as part of the China-Pakistan Economic Corridor (CPEC), one of the Chinese projects of the Belt and Road Initiatives (BRI) which should connect Asia with Europe and Africa.
“The Chinese have become cautious about investing more money because they know it is a financial black hole due to Pakistan’s difficult long-term economic circumstances,” said Jeremy Garlick, professor of international relations at the University of Economics and Commerce. from Prague. “China has to maintain the facade that CPEC is working because it is supposed to be a fundamental part of the BRI,” the expert added.
Last month, following a meeting of the body that decides future CPEC investments, Pakistan requested $17 billion in new projects. After Prime Minister Sharif’s visit, Beijing issued a statement that only vaguely mentioned updating the economic cooperation agreement.
However, China agreed to go ahead with the $6.7 billion Main Line-1 rail project, which, built in three phases, should improve connections between the city of Karachi in the south and Peshawar in the north. China has only committed to the first phase, but agreed to modernize a part of the Karakoram Highway that connects the two countries through mountainous terrain, often closed during the winter due to snowfall.
According to experts, however, new economic cooperation agreements are unlikely to be signed because the security situation in Pakistan, especially in the last year, has deteriorated considerably. In March, an attack killed several Chinese engineers and was not the first episode of its kind. Pakistan also owes $15 billion to Chinese energy producers. “We will not see large investments, nor China completely withdrawing from cooperation with Pakistan,” Garlick explained to Nikkei Asia. “CPEC will remain an important undertaking only in rhetorical terms,” added Mohammad Shoaib, a professor at Islamabad’s Quaid-i-Azam University, saying that if there is any progress in terms of investment, it will be very slow.
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