ISLAMABAD: Budget deficit clocked in at 3.2 percent of gross domestic product between July 1, 2017 and February 15, officials said on Tuesday, below the deficit of 3.9 percent reported in July-March 2017 and well above 2.2 percent deficit in July-December this fiscal.
Analysts said the country posted a budget deficit of Rs1,110 billion for the first seven and a half months of the fiscal year, avoided a potentially slip-up before September election but its fiscal challenge is likely to get harder.
Economists said the eight-month fiscal deficit is still under control given that it stood at 3.9 percent or Rs1,238 billion for the first nine-month period of the last fiscal year of 2016/17.
“But, it is yet to be seen how economic managers would avoid temptation to plunging into spending spree just ahead of ending their tenure within the next three months,” an economist said.
Government managed to keep budget deficit at 2.2 percent of GDP for the first half of the current fiscal year, and it went up by just one percent till mid February.
Nonetheless, if the government succeeds in keeping budget deficit at 5 percent during the electioneering year it will be considered as a miracle because spending spree might grip the dwellers of finance ministries at both the centre and provincial levels in the last quarter of the current fiscal year.
Economists, however, feared that budget deficit might reach six percent of GDP by the end of the fiscal year ending on June 30, 2018.
Senior officials of the Finance Ministry told The News that Pakistan and the International Monetary Fund (IMF) agreed that budget deficit would exceed five percent of GDP during the current fiscal year of 2017/18 as against the initially envisaged target of 4.1 percent.
Pakistan's authorities has already signed an IMF report on post program monitoring to be presented before the Fund’s executive board meeting scheduled on coming Monday in Washington DC. The report related to $6.7 billion extended fund facility loan program is crucial to determine the ties with other foreign credit agencies. Pakistan exited the three-year loan program in September 2016.
Budget deficit had sharply risen to 5.8 percent of GDP in the last fiscal year with the centre and provinces having blamed each other for ‘massive slippages’.
“But, actually both are responsible for their lavish spending without proper homework,” an economist said.
The centre accused the provinces for overspending billions of rupees and subsequently causing budget deficit in June last year despite the fact that the federating units had promised to generate revenue surplus by one percent of GDP to help curtail fiscal deficit.
“In contrast, provinces had plunged into spending spree up to such an extent that it caused ballooning of budget deficit up to the level of 5.8 percent of GDP in the last fiscal year,” said an official dealing with fiscal matters in Islamabad.
Provinces, however, argued that the federal government kept them in dark about actual revenue collection of Federal Board of Revenue and they came to know by the yearend alone that the tax collection target was missed with huge margin, making it impossible for them to stop expenditures at the last moment.
“If the centre had informed us at an appropriate time the deficit might have been controlled,” a provincial representative said.
from The News International - Business http://ift.tt/2oCBaZg
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