KARACHI - In sharp contrast to the recently-assumed official target of 5 per cent of Gross Domestic Product (GDP), Pakistans fiscal deficit is expected to be 6-6.5 per cent (Rs1.1 trillion) of GDP in the current financial year ending June 2011, according to economic experts. The fiscal deficit for the last quarter (April-June) of the ongoing financial year is also projected more than 2 per cent of GDP, expert predicted. Federal Finance Minister Dr Abdul Hafeez Shaikh has reportedly said that the fiscal deficit might reach 5 per cent of GDP by the close of FY11 against the budget target of Rs812 billion (4.7 per cent of GDP) in the wake of the emergency tax corrective measures (other than Reformed General Sales Tax) proposed by the federal government to curb budget deficit and enhance revenue generation. Such measures have been discussed with the IMF mission at the technical level talks being underway for the last two days. Sources in the Ministry of Finance said Pakistans economic team has informed IMF mission that the fiscal deficit target of 4.7 per cent of GDP could not be achieved in current domestic and international economic circumstances. The proposed fiscal tightening measures seem to be ineffective in maintaining fiscal stability and managing deficit to the desired range of 5 per cent by the end of this fiscal as imported inflation caused by increasing international oil and food commodity prices will deteriorate the external sector position, surging the volume of imports, especially petroleum group imports. This will result in increase in oil import bill and affect current account suitability in the current half of FY11. Moreover, delays in external financing might also swell countrys external and domestic debts to alarming level in the upcoming quarter, said an economist. He further said the growing revenue-expenditure gap is unlikely to be narrowed sharply at least in the short-term in the presence of the challenges lie ahead for the countrys economy. The national economy is already being confronted by increased government borrowings from the banking sources to meet public expenditure due to higher inflation, heavy defense spending on war on terror and the rehabilitation of at least 20 million people affected from the devastating floods, said another expert. The anticipated new measures include 15 per cent flood surcharge on withholding and advance taxes increase in special excise duty by 1.5 per cent, broadening of tax base and recovery of areas. The government is expected to generate Rs25 billion additional revenue through implementing the proposed tax plan of financing budget deficit. These measures, along with cut in power subsidies and passing through changes in international oil prices, are likely to be implemented from the last quarter (April-June) of this fiscal year. Earlier, Finance Minister warned that the deficit could shot up to Rs1.37 trillion or 8 per cent of GDP while Governor State Bank had also indicated that the deficit would widen to about 6 per cent of GDP in FY11. At the beginning of the fiscal year, the announced fiscal deficit target was Rs685 billion (4 percent of GDP) that was revised in the aftermath of the floods. It must be mentioned here that currently, the visiting mission of the International Monetary Fund is in talks with Pakistans economic authorities to conduct technical discussion and to prepare the fifth review report of the economic performance of the country under the Stand-By Arrangement Programme. If the ongoing talks get successful, then it would pave a way for the completion of the fifth review before the end of June. It would also determine the release of pending sixth tranche of $1.3 billion of $11.3 billion total IMF loan. Moreover, these discussions would propose a set of performance criteria for end-June 2011 and structural benchmarks that might form the basis for the sixth and final reviews remaining under the SBA. The IMF programme has been derailed for the last eight months as the structural benchmarks on implementing a value added tax on July 1, 2010 and the end-June 2010 performance criteria on general budget deficit and government borrowing from the central bank were missed. Pakistans fiscal deficit grew by 2.9 of GDP in the first half (July-December) of the current financial year 2010-11 against 2.7 per cent during the same period of FY10. The fiscal deficit increased to Rs490 billion or Rs171 billion of GDP in July-December FY11. By the end of second quarter (Jul-October) FY11, fiscal deficit reduced marginally by 22 per cent to Rs214 billion (1.2pc of GDP).