September 06, 2008	Saturday	Ramazan 05, 1429

ISLAMABAD, Sept 5: The government is expected to revise several macroeconomic targets for 2008-09 owing to major slippages in the first quarter of the current fiscal year, rising fiscal constraints and slower revenue growth.

Sources told Dawn that based on initial economic performance, it was virtually impossible to achieve macroeconomic targets envisaged in the budget for 2008-09 and they needed to be ‘rationalised’.

The ministry of finance and the planning commission would start consultations for revising the estimates by the end of this month, the sources said.

According to the sources, the indicators included crippling inflation, current and development expenditures, economic growth rate, exchange rates, imports and fiscal and current accounts deficits.

They said the revenue performance during the previous fiscal year had declined and no improvement was expected during the current year. The revenue receipts declined to 14.3 per cent of gross domestic product (GDP) in 2007-08 against 14.9 per cent a year before, registering a decrease of 0.6 per cent. Tax and non-tax revenues had declined by 0.2 per cent and 0.4 per cent of GDP, respectively, during 2007-08 against 2006-07.

On the other hand, expenditure during 2007-08 had increased from 19.2 per cent of GDP in 2006-07 to 21.7 per cent in 2007-08, mainly because of more than 35 per cent increase in the current expenditure.

The sources said that since no major initiative had been taken for additional resource mobilisation, the fiscal deficit would keep on rising and was expected to miss the budgeted target of 4.7 per cent of GDP by a wide margin and might touch eight per cent by the end of the year.

The government, they said, had already slashed development expenditure by at least 25 per cent, which would affect the GDP growth rate. The government had fixed a growth rate of 5.5 per cent for the current fiscal year, which could be revised to 4.5 per cent or even less, an official said.

Initial indicators suggested that the current account deficit could not be contained at 6 per cent of GDP and foreign exchange reserves could not be built up to $12 billion as had been envisaged in the budget for fiscal 2007-08 because of higher than anticipated interest payments, import growth and lower than targeted foreign inflows.

The increase in prices of essential commodities in recent months also suggested that budgeted target of 12 per cent inflation would be missed. Apart from supply constraints, the impact of oil price increases and the proposed 31 per cent jump in power tariff would fuel the already runaway inflation rate.

The sources said international lenders had also urged the country’s economic managers to come up with revised macroeconomic targets to qualify for some pressing foreign exchange injection for budgetary support. Unless all macroeconomic indicators are rationalised, lenders and investors have indicated their reluctance to commit reasonable amounts. The upcoming visit of an International Monetary Fund team next week, the sources said, would revolve around these issues.

Multilateral lenders have been asking the government for the past two months to reduce fiscal deficit to about four per cent of GDP, contain expenditure and reduce subsidies.