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IMF anticipates fiscal deficit at 6.5% of GDP in FY12 – Alfalah Securities Limited

Karachi: The International Monetary Fund (IMF) has projected Pakistan’s fiscal deficit in FY12 to increase to 6.5% of GDP against the govt.’s target of 4%. IMF has also projected Pakistan’s inflation to hover around 13.9% and GDP growth of 2.6% against govt.’s target of 12% and 3.8% (revised from 4.2% after recent flood hits) respectively. According to the data released by the Federal Bureau of Statistics, the fiscal deficit of Pakistan in 1QFY12 stood at 1.1% of GDP and it is feared to reach at 5.5-6% of GDP if the current situation prevailed.

According to Alfalah Securities Limited, IMF indicated that a rising fiscal deficit is being witnessed primarily due to large energy subsidies being granted while on the other hand, the government has also shown little concern to overcome this issue. The IMF had demanded Pakistan to reduce its fiscal deficit at a minimum level by abolishing subsidies and increasing its tax-to-GDP ratio however, the government’s failure to implement these reforms has led the IMF to halt the remaining tranche of USD 3bn to be disbursed in Sept. 2011.

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