---
title: "Fly economy: Pakistan’s belt-tightening begins in high places"
description: "Pakistani ministers can no longer fly business class or stay in five-star hotels abroad. And the government thanks them for taking salary cuts."
type: "NewsArticle"
publisher: "Daily Maverick"
site: "https://www.dailymaverick.co.za"
section: "Business Maverick"
author: "Bloomberg"
author_url: "https://www.dailymaverick.co.za/author/bloomberg/"
canonical_url: "https://www.dailymaverick.co.za/article/2023-02-23-fly-economy-pakistans-belt-tightening-begins-in-high-places/"
published: "2023-02-23T05:55:55"
lang: "en-ZA"
word_count: 350
---

# Fly economy: Pakistan’s belt-tightening begins in high places

> Pakistani ministers can no longer fly business class or stay in five-star hotels abroad. And the government thanks them for taking salary cuts.

By Bloomberg · Published 23 February 2023, 07:55 SAST

## Key points
- Pakistan is on the brink of financial disaster, having unveiled $764-million of cost-cutting measures to help revive a $6.5-billion IMF bailout. Prime Minister Shehbaz Sharif has called for austerity, simplicity and sacrifice from the government, while ministers and high-ranking officials have volunteered to forgo salaries and perks. The government has also implemented tax increases and banned luxury item purchases until next year. The State Bank of Pakistan has raised its benchmark rate by 725 basis points since the start of 2022 and is set to review policy again on 6 March. With $8-billion in dollar bonds due by 2051, the country must act fast if it wants to avoid debt default.
- South Asian nation Pakistan unveils $764-million of cost-cutting measures to help revive a $6.5-billion IMF bailout
- Prime Minister Shehbaz Sharif calls for austerity, simplicity and sacrifice from the government
- Tax increases, energy price hikes and currency devaluation are among the measures taken to meet IMF preconditions
- The State Bank of Pakistan has raised the benchmark rate by 725 basis points since the start of 2022

## Content

The South Asian nation fighting to stay solvent and avoid a debt default has unveiled $764-million of cost-cutting measures needed to help revive a $6.5-billion [International Monetary Fund bailout](https://www.bloomberg.com/news/articles/2023-02-22/pakistan-imf-deal-due-any-day-to-boost-economy-minister-says). The government will follow up with further austerity measures in the next budget in July, Prime Minister Shehbaz Sharif said on Wednesday.

“This is the need of the hour,” he said after a cabinet meeting in Islamabad. “We have to show what the time demands from us and that’s austerity, simplicity and sacrifice.”

The world’s fifth most populous country has descended dangerously close to a debt default in recent months. The $350-billion economy, with just $3- billion of foreign-exchange reserves by one estimate, also faces a dollar squeeze that tests its external stability. Supply disruptions caused by flooding, food shortages and steps the government took to meet IMF’s preconditions for the rescue may push inflation above 30% for the first time on record, according to Bloomberg Economics.

As common people come out on streets to protest crippling conditions, the government is trying to show austerity begins at the highest levels. Several federal and state ministers besides high-ranking government officials have volunteered to forgo salaries and perks, Sharif said. The government has also banned the purchase of luxury items and cars until next year, he added.

Parliament this week voted to roll out tax increases including higher levies on luxury imports. The government had raised energy prices and let the currency weaken after the IMF called on the nation to scrap subsidies and [enable](https://www.bloomberg.com/news/articles/2023-01-30/pakistan-rupee-declines-for-a-sixth-day-ahead-of-imf-loan-talks) a market-determined exchange rate.

Meanwhile, the State Bank of Pakistan has raised the benchmark rate by 725 basis points since the start of 2022 and signaled more monetary tightening is coming. SBP will hold its next policy review on 6 March.

Pakistan faces $542.5-million of coupon repayments this year, according to data compiled by Bloomberg. In all, the country has $8-billion in dollar bonds due by 2051 with the next payment of $1 billion due in April next year. Most of the nation’s external debt of about $100-billion is sourced from concessional multilateral and bilateral sources. **BM/DM**