LAHORE: Government has managed to keep the fiscal deficit for the first half of the fiscal year (2015/16) well below the target, a think tank said on Monday.
The Institute for Policy Reforms (IPR), in a report, said the fiscal deficit for July-December 2015 was 1.7 percent.
The report said the entire focus of policymakers, at present, seems to be on balance of payments and fiscal deficit.
“Revenue collection and expenditure are largely on track,” it said. “The fall in inflation stalled because of increase in general sales tax on some items and because the Pakistan Rupee lost value in August and October.”
The report said large scale manufacturing grew year on year 3.9 percent during July-December 2015 against its annual target of six percent. In agriculture, production of cotton and rice, two major crops, fell. Sugarcane production may increase from last year’s low, but will be short of the target of 68 million tons. Agriculture growth is unlikely to meet government’s target of 3.9 percent for the year.
The report said investment also may not meet the target set by the government, as there may be cuts on development.
The IPR advised the government to avoid cuts on development expenditure. “Limited funds available are not wisely spent. Project selection is top-down, contracts overpriced and delivery tardy,” it said.
The report said credit to the private sector and import of machinery have increased. “It is not clear if these are sufficient to boost investment to the desired level,” it added.
It said burden of debt repayment will increase significantly in the coming years.
The IPR said exports fell 15 percent during the six months under review. “Textiles, our main export, alone fell 9 percent. This is partly because of slow growth of the world economy and world trade,” it said. “However, Pakistan’s exports have suffered also because of rupee value and fundamental issues of competitiveness.”
It further said other factors hinder sustained economic growth are governance, labour productivity, and education.
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