Mini-budget measures not enough to curb fiscal deficit: Moody’s

Published February 1, 2019
Finance Minister Asad Umar presents mini budget in Parliament. — File photo
Finance Minister Asad Umar presents mini budget in Parliament. — File photo

KARACHI: The country’s fiscal deficit is likely to reach six per cent of GDP during this fiscal year as the government has failed to introduce measures to curb expenditure and increase revenues in the supplementary finance bill announced last week, noted Moody’s on Thursday.

The mini-budget will foster exports and support the country’s manufacturing sector but ignored spending cuts or measures to increase revenues eroding government’s ability to meet the deficit target of 5.1pc, added the note.

The financial services company expects the fiscal deficit to widen to 6pc as the revenue is expected to remain below earlier projections given placid economic growth and new incentives to boost revenues before narrowing to 5pc of the GDP by FY21.

According to State Bank of Pakistan’s quarterly report issued on Wednesday, the fiscal deficit during 1QFY19 year increased to 1.4pc following marked slowdown in revenue growth as overall expenditure increases remain unchanged against same period last year despite significant cuts in federal and provincial development spending.

The report noted that on the expenditure front, major challenge was the steep rise in debt servicing payments.

Moody’s commented that barring exports, the country’s external sector has shown marked improvement during the last few months visible in 10pc increase in remittances and 3pc slowdown in imports.

Pakistan’s current account deficit dropped 4.4pc year-on-year during 1HFY19 to $8bn driven by a sharp decline in import of goods and services. Moreover, non-oil imports saw a contraction of 4.4pc during the period under review as against an increase of 19.1pc last year.

The government has received $12bn — $6bn each from the Saudi Arabia and the UAE — which is likely to provide for its net financing needs during 2019. However, the government is also negotiating a programme with the International Monetary Fund in addition to discussions with other multilateral lenders including the Asian Development Bank, Inter­national Bank for Recons­truction and Development and the Islamic Development Bank to improve its external position.

Published in Dawn, February 1st, 2019

Now you can follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

UNGA speech
25 Sep, 2022

UNGA speech

CRISES test a nation’s resilience but also provide opportunities to rise and move forward. Prime Minister Shehbaz...
Dar’s return
25 Sep, 2022

Dar’s return

WITH Interior Minister Rana Sanaullah confirming the return of Ishaq Dar next week to ‘facilitate’ the PM in...
Iran hijab protests
25 Sep, 2022

Iran hijab protests

FOR over a week now, Iran has been witnessing considerable tumult after a young woman died earlier this month in the...
Post-flood economy
Updated 24 Sep, 2022

Post-flood economy

WITH a third of the country — especially Sindh and Balochistan — under water, over 33m people displaced, and...
Panadol shortage
24 Sep, 2022

Panadol shortage

FROM headaches to fever to bodily pain — paracetamol is used ubiquitously in Pakistan as the go-to remedy for most...
Star-struck cops
24 Sep, 2022

Star-struck cops

IN this age of selfies and social media, it is easy to get carried away in the presence of famous people, even if ...