The cash-strapped economy of Pakistan is going to take another restricting hit, this time by the International Monetary Fund (IMF) as it looks towards furthering the constraints on short-term borrowings for filling the budgetary gap which has arisen from the forecast that Pakistan's gross financing needs would be up to 1.5 per cent higher than its gross domestic product in comparison to the previous estimates.

As per estimates of the IMF, Pakistan's financial needs to finance budgets and honour international obligations is expected to be about Rs 14 trillion, which makes at least 30.7 per cent of its economic size during the financial year ending June 30, 2021.

The report adds that the estimates are at least 1.5 per cent of the GDP higher than the previous estimates in the IMF report in April.

IMF's expected restrictions or constraints on Pakistan have also been confirmed by the Pakistan government as Ministry of Finance said that both sides have finalised the arrangements to review country's financing plan to meet its short-term and medium-term obligations in efforts to revive the $6 billion bailout programme.

Financial experts say the increase in gross financing needs is primarily due to the "unanticipated decrease in tax collections and an increase in public expenditures, further expanding the budget gap."

Sources in the ministry maintained that tax revenue declined due to certain uncontrollable circumstances such as COVID-19 pandemic, which shrunk tax collection to bare minimum, prompting more borrowings.

As per the Federal Board of Revenue (FBR), the country's gross financing needs were 31.2 per cent of the GDP.

The government's failure to plan the budgetary needs and increase in energy prices halted the second review of the IMF programme, which was scheduled in March 2020.

Experts say that Pakistan will have to increase tax burdens and reduce public expenditure, if it wants to have any future agreements as it will have to cut its gross financial needs severely for the next fiscal year starting July 1, 2021.

IMF, in its April 2020 report, had highlighted that Pakistan could improvise its debt sustainability position if it manages to see itself out of the financial assistances provided by countries including Saudi Arabia, United Arab Emirates (UAE) and China.

(IANS)