Islamabad – Pakistan plans to cut its fiscal deficit to 4.3 percent in the next fiscal year starting July 1, as Finance Minister Ishaq Dar announced the new federal budget for FY 2015/16 with a total outlay of 4.313 trillion rupees ($42.3 billion).
Presenting the budget in the National Assembly, Dar announced 7.5 percent ad-hoc relief allowance in the pay and pension of the government employees following the rise in the country’s per capita income to $1512 in FY15 from $1384. Pakistan’s inflation of an estimated 4.6 percent for the whole year is the lowest in over a decade.
A set of reforms in line with the International Monetary Fund program helped Pakistan reduce the deficit to 5.5 percent in 2013-14 from a record high of 8.2 percent in the preceding year.
Pakistan is hoping to bring it further down to below 5 percent by the end of the current fiscal ending June 30. During July-March 2014-15, fiscal deficit was contained at 3.8 percent against 3.9 percent in the same period of the preceding fiscal year.
The IMF in 2013 bailed out Pakistan with a $6.6 billion loan under the Extended Fund Facility, after the South Asia’s second-biggest economy faced an imminent default on its foreign payments.
IMF says Pakistan has made progress with macroeconomic indicators showing positive trends but the country of over 190 million people needs to stay the course of reforms to sustain the growth momentum.
Pakistan’s economy is estimated to grow by 4.24 percent in the current fiscal year, missing the 5.1 percent original target but still higher than the 4.03 percent posted in the previous fiscal year, according to the 2014-15 Economic Survey, a pre-budget document.
The agriculture sector grew at 2.9 percent compared to 3.3 percent target while industry grew at 3.6 percent, a little over half the target set for the whole year. The services sector posted 5.0 percent growth, falling slightly short of 5.2 percent target.
“The main contributing factors of this rapid increase in per capita income include acceleration in real GDP growth, relatively lower growth in population and the consistent Pakistani rupee,” Dar said while presenting the survey in Islamabad on June 4.