As the Pakistan economy goes spiralling down notching up highest inflation in the world, increased rates of interest and unsustainable public debt, the International Monetary Fund (IMF) has asked the government to freeze salaries of government employees.
<em>The Express Tribune</em> reported that the IMF is insisting that Pakistan should follow the fiscal consolidation path due to a high public debt that is set to hit 90 per cent of the total value of the national economy. IMF wants Pakistan to freeze salaries of government employees and show a nominal primary deficit in the new budget, according to sources in the finance ministry.
The deadly novel coronavirus pandemic, which originated from Wuhan, China, in December 2019 too has exposed the vulnerabilities of Pakistan's economy which was struggling even in the pre-Covid days owing to weak economic foundations.
The government is resisting the IMF demand due to high inflation which has decreased people's real income. However, it plans to abolish over 67,000 vacant posts and plans a ban on purchase of vehicles.
Meanwhile, the Inflation Monitor for April issued by the State Bank of Pakistan (SBP) on Saturday said: "Pakistan witnessed highest inflation not only in comparison with the developed economies but also with emerging economies." SBP pushed up interest rates in a bit to cool down inflation but the high rates proved counterproductive as they further increased inflation while the private sector stopped borrowing costly money hampering industrial growth and services, reports <em>Dawn</em>.
At the same time, the government slashed petroleum prices thrice during the two months, which reduced the cost of production, transportation and finally reduced inflation. The SBP has provided relief amounting to hundreds of billions in the form of principal payments deferrals, debts rescheduling and lending on easier terms for industrial sector to avoid massive layoffs..