The government is set to announce its budget for FY24 on 9th June, which will provide some clarity on its plan to bring the country back on the right track in the current uncertain times. The country has been facing multiple crises since last 12-15 months, due to devastating floods in Jul/Aug last year and deteriorating position of external accounts, which was further exacerbated by tug of war in political arena.
The budget is very significant in the current context, as the economy is in shambles with all time high inflation and elections are scheduled in Oct’23, which might influence the government to announce a populist budget in order to gain public support.
However, the government also faces the challenge of maintaining a delicate balance between much needed reforms along with restoring economic growth and providing relief to common people in high inflationary environment.
According to news flows and commentary by finance ministry officials, resumption of current IMF program seems unlikely as the program is expected to conclude in Jun’23 and three reviews are still pending with not much time in hand. Given the massive burden of external payments in next couple of years, the country will have to enter into another IMF program along with more strict policy actions on structural reforms.
The upcoming budget is expected to remain neutral for capital market, as investors will look forward towards government’s efforts to address long term structural issues and generating additional revenues without burdening the already documented sector with additional tax measures.