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KARACHI: Pakistan's fiscal deficit for the first six months of the fiscal year 2011/12 (July-June) was 2.6 per cent of gross domestic product (GDP), a Finance Ministry official told Reuters on Friday.
This compared with a deficit of 2.9 per cent of GDP in the same period the previous year.
“The full-year fiscal deficit target has also been revised upwards to 4.7 per cent, from the earlier estimate of four per cent,” said the official, who declined to be identified.
The fiscal deficit widened to 6.6 per cent of GDP in the 2010/11 fiscal year.
“Containing fiscal deficit to 4.7 per cent in this fiscal year looks like an extremely difficult task, especially as it is election year,” said Asif Qureshi, director at Optimus Capital Management Ltd.
“International oil prices are also rising which means energy subsidies will increase, therefore increasing the government's expenditure.”
Subsidies and slow implementation of reforms as demanded by the International Monetary Fund (IMF) have been one of the main reasons for a high fiscal deficit.
In 2008, Pakistan and the IMF agreed on a three-year package loan for $11 billion. But the programme was halted in 2010 because of slow implementation of fiscal reforms, and only $8 billion has been disbursed so far.
Islamabad opted not to seek a new IMF programme or an extension. It has to start repaying the loan in early 2012 and that is when the pressure on foreign exchange reserves will increase, analysts say.
“The probability is that we will not be going to the Fund right now and are in fact expecting a few inflows,” the Finance Ministry official said.
The current account recorded a provisional deficit of $2.154 billion in the first six months of the 2011/12 fiscal year, compared with a surplus of $8 million in the same period last year, according to data from the State Bank of Pakistan.
