Pakistan, IMF revise budget deficit target up to 5pc of GDP

ISLAMABAD: Pakistan and the IMF have revised the budget deficit target upward up to 5 per cent of the Gross Domestic Product (GDP) against earlier envisaged target of 4.1 per cent for the current fiscal year 2017-18, The News has learnt.

In a bid to restrict the budget deficit at 5 per cent of the GDP, Prime Minister Shahid Khaqan Abbasi is expected to play a key role for binding the four chief ministers of provinces for avoiding spending spree for achieving consolidated budget deficit within the desired limits during the election year. Although, it will not be an easy task, but the economic managers seem upbeat that it can be delivered with the intervention of premier Abbasi.

“We will place a mechanism that will not allow the budget deficit escalating 5 per cent of the GDP for the current fiscal year. The budget deficit of the last fiscal year at 5.8 per cent of the GDP will not be repeated in the ongoing fiscal year,” official sources confirmed to The News here on Sunday.

Finance ministry high-ups told the IMF mission last week that the budget deficit had escalated up to 5.8 per cent of the GDP mainly because of over spending done by the provinces in May and June 2017. “Over 1.2 per cent of GDP in terms of deficit escalated last year because of more spending done by the provinces,” said the official.

When asked that how the Centre will convince the province for repetition of same practice in this fiscal, the official said that PM Shahid Khaqan Abbasi was requested for playing his role this time in order to avoid extraordinary spending in the current fiscal year.

There was another blunder done by the Centre last year as the provinces were told till the last moment that the FBR would be achieving its target of Rs3,521 billion which ultimately could fetch Rs3,262 billion, so it impacted expenditure management of the provinces negatively.

This ongoing fiscal year, the sources said, was expected that the incumbent regime will complete its tenure on June 1, 2018, so the expenditures will be expected to be incurred till May 30, 2018. Last year, the provinces had spent Rs200 billion each in May and June, so total overspending had crossed Rs400 billion mark; therefore, this year at least Rs200 billion could be saved.

The budget deficit stood at 1.2 per cent of the GDP for the first quarter (July-Sept) period of the current fiscal year, and Finance Ministry officials claimed that strict disciplinary arrangements were in place, so the budget deficit would be restricted around 2.4 per cent of the GDP for the first six months (July-Dec) period of the current fiscal year.

Finance Secretary Shahid Mehmood, who is going to retire next month after reaching at the age of superannuation, and anyone assuming this slot afterwards will have to strive hard to ensure tight fiscal discipline in order to restrict the budget deficit at 5 per cent of the GDP; otherwise, the spending spree in election year could cause more indiscipline by end June 2018.