ISLAMABAD (Reuters) - Prime Minister Imran Khan said on Wednesday Pakistan faced “unprecedented economic crisis” as his government forecast growth of 4% for next year ahead of an austerity budget aimed at securing a $6 billion loan from the International Monetary Fund.
The new growth forecast for the fiscal year to June 2020, was approved during a meeting of the government’s National Economic Council that signed off on measures including a five-year economic plan.
“The Prime Minister during the meeting said that the country was facing unprecedented economic crisis,” his office said in a statement, calling on provincial governments to join forces with the Islamabad government.
While 4% growth would represent a marked slowdown from growth rates above 5% in the previous two years, it is still well above the IMF’s own forecast of 2.8% next year.
The de facto finance minister, Hafeez Shaikh, is due to present the budget in parliament on June 11 and has already indicated it is likely to raise taxes and squeeze spending to meet the expected terms of the draft IMF bailout accord.
Khan’s government came to office last year facing an imminent balance of payments crisis and a ballooning budget deficit that forced it to seek Pakistan’s 13th IMF bailout since the late 1980s.
The IMF agreement reached earlier this month still requires approval from the Fund’s board in Washington but it has already stipulated that Pakistan must take painful measures to cut a fiscal deficit expected to top 7% of gross domestic product.
Under the accord, Pakistan agreed to cut its primary budget deficit - not including interest payments - to 0.6% of GDP from a currently forecast 2.2%. With an economy of some $315 billion, that implies finding some $5 billion in extra revenue or spending cuts.
On Saturday, Shaikh said he was preparing a belt-tightening budget to tame the fiscal deficit, adding that both civilian and military leaders agreed austerity measures were needed to stabilise the economy.
Writing by Asif Shahzad; Editing by Frances Kerry