ISLAMABAD - Terming the economic targets little ambitious, the State Bank of Pakistan (SBP) on Thursday noted that country’s budget deficit and current account deficit could go beyond the budgetary targets of the government set for the ongoing financial year 2011-2012 keeping in view the current progress of the economy.

State Bank of Pakistan Governor Yaseen Anwar informed the Senate Standing Committee on Finance and Economic Affairs that government’s economic targets set for the current fiscal year are little ambitious. However, he said that SBP is supporting the government in achieving these targets. Talking about the sharp rupee depreciation against the US dollar, the Governor SBP said that some market players are playing games in this regard.

During the briefing on current economic situation of the country, the SBP and Finance Ministry were not on the same page on the economic targets including fiscal deficit and current account deficit targets. Briefing the meeting on economic situation of the country, Chief Economic Advisor SBP said that fiscal deficit could hit 6 per cent of the GDP keeping in view the current progress of the economy. However, Secretary Finance, Dr Waqar Masood opposed it and commented that it would remain around 4.7 per cent, as revenue collection would further increase in the remaining two quarters of the financial year that would reduce the budget deficit. He also informed that fiscal deficit would remain at 2.5 to 2.6 per cent during the first half (July-December) of the year 2011-2012.

The actual budget deficit target was four per cent of the GDP that was revised to 4.7 per cent due to the floods in Sindh province, he maintained. Similarly, the SBP official informed the Senate body that current account deficit remained at $ 2.1 billion during the first five months (July-November), which is expected to shoot up to the range of $5 to $ 6 billion at the end of current fiscal year.

However, the Secretary Finance again showed disagreement with the figures of SBP and said that current account situation would improve in the months to come with several steps taken by the government. He informed the committee that government is expecting to receive money by issuing foreign bonds worth of $500 million, hoping to receive $800 million from Etisalat, expecting to get funds from US under Coalition Support Funds, auction of 3G licences, funds from Asian Development Bank and World Bank and issuing of sukuk bonds in the second half of the current fiscal year that would improve the current account situation, he added.

He also informed the committee external debt was recorded at $ 61.50 billion and foreign exchange reserves mounted to $ 17 billion. The committee was informed that government’s borrowing from the scheduled banks is Rs 648 billion till December 16 against Rs 96 billion of last year, however it (Rs 648 billion) also include Rs 391 billion in circular debt. The Secretary Finance informed that current circular debt stood in the range of Rs 370 to Rs 400 billion.

The SBP official also informed that inflation rate has been reduced to 9.7 per cent in December 2011, however this would surge to the targeted rate of 12 per cent at the end of June 2012 due to the adjustment in administrated prices and exchange rate passes through the consumers. However, it would be more than the target level of 9.5 per cent set for the fiscal year 2013, he added.

He also informed that exports of the country are declining due to the lower prices of cotton in international market while imports are surging sue to the higher oil prices. The value of rupee against dollar has depreciated by 4.4 per cent up till December 2011 due to differential in exchange rate in the open market and inter-bank rate. The Committee members showed concerns over the sharp rupee depreciation against the US dollar, as all imported commodities including oil would be expensive.

They were of the view that country could not achieve the exports target of $25 billion during the current financial year. Similarly Foreign Direct Investment was recorded at $370 million in July-November period. There would be pressure on the foreign exchange reserves in the second half of the year 2011-2012, as large payment of $ 1.2 billion is to be made to the International Monetary Fund (IMF).

The SBP also informed the Committee that tax to GDP ratio is very low in Pakistan i.e. ten per cent that should be increased as in emerging economies it is at 22 per cent and in developed economies at 37 per cent. On this, Secretary Finance informed that revenue collection in first half stood at Rs 840 billion that is 43 per cent of the overall collection.

Later, briefing the Committee, the officials of the Federal Board of Revenue (FBR) informed that they have forwarded the NATO containers missing case to the National Accountability Bureau (NAB) for further investigation. There were 21 cases including case on former member custom Munir Quershi also moved to the NAB. The government aimed to recover Rs 55 billion from the missing containers scam, they added.