IMF urges Pakistan to freeze salaries of government employees

The International Monetary Fund (IMF) has urged Pakistan to freeze the salaries of government employees and adhere to the path of fiscal consolidation by showing a nominal primary deficit in the new budget.

The IMF is insisting that Pakistan should announce a primary budget deficit target – total deficit excluding interest payments – of only Rs 184 billion or 0.4% of gross domestic product (GDP).

“Owing to the prevailing tight fiscal situation, growing public debt and Pakistan’s decision to seek debt relief from G20 countries, the IMF was asking Islamabad to freeze salaries of government employees,” the sources said.

However, the Pakistan Tehreek-e-Insaf (PTI) government is resisting the demand due to high inflation that has eroded people’s real income.

Nonetheless, it is inclined to abolish over 67,000 posts that have remained vacant for over one year and is also ready to further squeeze current expenditures including a ban on purchase of vehicles.

According to sources, 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 high inflation that has eroded the real income of people”, the sources said.

The Pakistan government is set to unveil the budget on June 12 and struggles to strike a balance between continuing with the fiscal consolidation and providing an impetus to economic growth.