Pakistan’s fiscal deficit rises to highest level in 28 Years

The deficit increased to 8.9% of GDP in the year ended June compared with 6.6% a year ago, just ahead of IMF’s first quarterly review of its bailout deal.

Representational image | A money changer handles bundles of Pakistani rupee banknotes at a currency exchange market in Pakistan. | Photo: Asim Hafeez | Bloomberg

Karachi: Pakistan’s budget deficit rose to the highest in almost three decades, ahead of the International Monetary Fund’s first quarterly review of a bailout program that sought to curtail a fiscal blowout.

The deficit increased to 8.9% of the nation’s gross domestic product in the year ended June compared with 6.6% a year earlier, according to provisional numbers released by the Finance Ministry. That’s a big miss for the government, which targeted a narrower 5.6% gap.

The South Asian nation must also increase government revenue by more than 40% in the fiscal year that began in July, as part of the conditions for a $6 billion loan. Pakistan’s loan from the IMF could be in jeopardy if the trend of the government missing revenue target continues.

“It seems an uphill task,” said Samiullah Tariq, director research at Arif Habib Ltd., in Karachi. “If they’re unable to meet the target for the quarter, then a mini budget to raise taxes is possible in order to clear the next IMF quarterly review.”

The total revenue declined by 20% in the latest quarter due to a 98% decline in non-tax revenue, according to Tariq. – Bloomberg