- Signs do not show the economy getting out of trouble soon
The International Monetary Fund finds it has to set a technical mission soon after giving Pakistan a $6 billion Extended Finance Facility, because the core or primary deficit in 2018-2019 has gone far beyond all the projections. As the targets set by the IMF for the EFF were based on the reining in of the primary deficit, failure to achieve it would mean that all other targets would be missed. The primary deficit slippage is not all because of the failure of the Federal Board of Revenue (FBR) to achieve its target of collecting Rs5.5 trillion this fiscal year, but owes itself to it partially. The initial projection of this primary deficit was 1.8 per cent of the GDP, and the IMF wanted it brought down to 0.6 per cent. Actually, it was 3.6 per cent, and to meet the IMF target this year, another Rs1.6 trillion are needed, either in reduced spending or increased revenue, which the IMF technical mission, which should arrive on September 17, after Ashura, for 10 days, will do. The total deficit was projected at 7.2 per cent but reached 8.9 per cent. Normally, the mission would have come in November, but things have got a little hairy in the FBR, where it is hoped to collect Rs1 trillion in the quarter ending this month.
While it seems that the simple PTI formula of an honest government bent on prosecuting the corrupt did not yield immediate results, the FBR has told the Prime Minister in a briefing on Thursday that the tax base had been broadened. However, while the number of filers may have increased, this has not led to the increase in revenues expected. The increase will occur in the future, and cannot be easily quantified. It will also not be enough to prove the State Bank of Pakistan wrong, which in its latest annual perception survey predicted a further depreciation in the rupee because of balance of payments pressures, the widening fiscal deficit and increasing domestic inflation. This is potentially the worst news for the government, for inflation and a falling rupee, causing further inflation, are really bad news electorally. The least the government can do is be upfront about the economic scenario.