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May 24, 2019

Govt eyes fiscal deficit to ratchet down at 6pc in FY2020

Business

May 24, 2019

ISLAMABAD: The government has envisaged the fiscal deficit target at six percent of GDP with primary deficit minus debt servicing at 0.6 percent for what the analysts called the hard-hitting budget of the next 2019/20 fiscal year ahead of an IMF $6 billion bailout program.

Officials said the finance ministry prepared salient features of upcoming budget for 2019/20 by envisaging reduction in budget deficit by 1.7 percent of gross developement product with an official announcement on Thursday that the next budget would be presented before the National Assembly on June 11.

“We want to slash the budget deficit from 7.1 to 6 percent of gross developement product whereas the primary balance will be brought down to 0.6 percent of GDP in the next fiscal year in line with the IMF agreement,” a top official of the finance division said.

Pakistan and the International Monetary Fund (IMF) in the middle of this month reached a staff-level agreement on economic policies that could be supported by a 39-month extended fund arrangement for about $6 billion.

The agreement is subject to approval of the International Monetary Fund’s executive board, subject to the timely implementation of prior actions.

“The forthcoming budget for FY2019/20 is a first critical step in the authorities’

fiscal strategy,” the IMF said in a statement then.

“The budget will aim for a primary deficit of 0.6 percent of gross developement product supported by tax policy revenue mobilisation measures to eliminate exemptions, curtail special treatments, and improve tax administration.”

The government decided to present the budget strategy paper for 2019/20 before the federal cabinet for approval.

Finance ministry’s spokesman Khaqan Najeeb confirmed with The News that the budget strategy paper for 2019/20 would be tabled before the cabinet in the coming days.

Analysts said the government is all set to present one of the toughest budgets under the International Monetary Fund program next fiscal year.

Sources said the government officially revised upward the budget deficit target from 6.1 to 7.1 percent of gross developement product for the outgoing fiscal year despite the fact that the deficit already touched 5 percent of GDP in the first three quarters of the current fiscal year.

Now, it wants to restrict the budget deficit at 7.1 percent of gross developement

product by allowing hike in deficit by just 2.1 percent of GDP in ongoing fourth quarter (April-June).

Economists Hafiz Pasha and Ashfaque Hasan projected the budget deficit to

exceed to 7.5 or 7.6 percent of GDP till June-end 2019.

Adviser to the Prime Minister on Finance, Revenue and Economic Affairs Abdul Hafeez Shaikh presided over a meeting to review the budget framework for 2019/20 on Thursday. He directed the officials of the finance ministry to timely complete the budget process to present it before the National Assembly on June 11.

Sources in the finance ministry said the budget making process would be in full swing before Eid and the government is expected to finalise its main work in weeks ahead of the festival.

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