Pakistan’s fiscal deficit for the first three months of fiscal year 2011-12 was 1.1 per cent of gross domestic product, a Finance Ministry official revealed. This compared with a deficit of 1.6 per cent of GDP in the same period last year. The target for fiscal deficit is 4 per cent of GDP in the year ending June 30. “The deficit could go to 4.4 per cent of GDP,” said the finance official.
The government’s fiscal deficit widened to 6.6 per cent of GDP for 2010-11, higher than the earlier estimates of 5.3 per cent which was the target agreed by the International Monetary Fund as well. Massive energy subsidies are one of the reasons for the swelling deficit but Pakistan has so far shown little interest in cutting these as also demanded by the International Monetary Fund (IMF). In 2008, Pakistan and IMF agreed on a 3-year package loan for $11 billion. But the programme was halted in 2010 because of slow implementation of fiscal reforms, and only $8 billion had so far been disbursed. Islamabad has to start repaying the loan in early 2012 and that is when the pressure on foreign exchange reserves will increase, analysts say. Pakistan opted not to seek a new IMF programme or an extension.
“The probability is that we won’t go to the Fund in this fiscal year as our external position is quite comfortable,” the finance official said. The current account deficit shrank to $189 million in the first two months of the fiscal year – July and August – from $1.016 billion a year earlier.
