ISLAMABAD – The International Monetary Fund (IMF) has imposed yet anotherstrict condition upon Pakistan to avail the IMF bailout package.

Pakistan will have to either cut development budget or the defence budgetupon IMF condition.

IMF has asked Pakistan to ensure primary surplus on budget deficit to moveahead with the programme, leaving it with the hard choice of eitherslashing down its defence or development expenditure.

The budget deficit has to be curtailed within a range of 4 to 5 percent ofGDP during the programme period. Moving towards a free float of theexchange rate and hiking power tariff by 22 percent are among other majorstumbling blocks to the way of evolving a staff-level agreement between thetwo sides.

For achieving a primary surplus on the budget deficit front, officialsources said the government will have to restrict deficit in such a waythat ensures out of total revenues minus total non-interest expenditureswithin the vicinity of 4 to 5 percent of GDP during the programme period.This indicates that interest payments could only be hiked, while thegovernment will have to make choice between cutting down defense anddevelopment spending for achieving reduction in budget.

“So the government will have to make hard choice either to cut down defenceor development spending if Islamabad wants to move ahead with the IMFprogramme,” said the official sources. Pakistan will have to implement all‘prior actions’ for evolving a consensus on staff level agreement with theIMF otherwise the talks would stall at the present stage.