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October 20, 2010

‘Fiscal deficit target missed due to higher expenditures’

National

October 20, 2010

ISLAMABAD: The expenditures overrun has forced the government to breach its envisaged fiscal deficit target in line with its agreement with the International Monetary Fund (IMF) for the first quarter (July-Sept) period of the current fiscal year, it is learnt.
The loose control of Ministry of Finance on expenditures side was resulting in yawning deficit with every passing day, said a senior official of Finance Ministry on Tuesday.
“The fiscal deficit target for the first quarter was fixed at 1.4 percent of GDP, equivalent to Rs240 billion, but it went up to 1.7 percent of GDP (Rs292 billion) by end September 2010, resulting in missing the target from start of the financial year,” the official confided.
All of the important high-ups in the finance and planning side including Minister for Finance Dr Abdul Hafeez Sheikh, Deputy Chairman Planning Commission Dr Nadeem Ul Haq, Secretary Finance Salman Siddiq and Special Secretary Finance Wajid Rana are currently abroad for attending strategic dialogue in Washington with US authorities.
The acting charge of Secretary Finance is with additional secretary finance Salem Sethi and there was no one to control the expenditure side.
The Federal Board of Revenue’s inability to achieve its desired tax collection target of Rs335 billion for the first quarter also widened the fiscal deficit.
The FBR has so far collected Rs290 billion in first quarter against the set target of Rs335 billion, indicating a revenue shortfall to the tune of Rs45 billion.
The expenditure overrun in the wake of ongoing war against terrorism, pressing flood requirements, continuous cash bleeding of public sector enterprises especially power sector and inability of Ministry of Finance to curb fund releases for development projects widened the gap between revenues and expenditures.
The fiscal deficit was out of control and the fiscal was just in its first quarter, the official said.
Owing to failure of Pakistan and the IMF to

complete fifth review under ongoing Standby Arrangement (SBA), the Fund authorities showed lenient view in the aftermath of severe flood and quantitative targets were relaxed for the first quarter, official sources said.
In pre flood situation, the fiscal deficit target was set at 4 percent of GDP.In the aftermath of flood the fiscal deficit was fixed at 4.5 percent of GDP for 2010-11, sources said.
Both sides envisaged curtailing the deficit in the range of 1.4 percent of GDP for the first quarter but it was already breached because of overrun expenditures and FBR’s massive shortfall in collecting revenues.
The IMF’s high-powered mission is expected to visit Pakistan by end October or early November to see progress on macroeconomic front as well as on Reformed General Sales Tax (RGST) and on power sector reforms.

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