Pakistan has failed to achieve the major policy objectives to reduce fiscal deficit at or below 3.5 per cent of the GDP and improving tax-to-GDP ratio to 12.7 per cent by 2012-13 could not be achieved, a World Bank mid-term progress report has said. The World Bank in its mid-term progress report said that the fiscal deficit target has now been set at 5.5 per cent for 2013-14, down from 6.6 per cent of GDP in 2010-11. The fiscal deficits were above six per cent of GDP during the last two years and above the target of 5.1 per cent of GDP in baseline fiscal year 2009-10. The fiscal situation has deteriorated, while the current account has improved but fiscal space for priority public investment in key sectors remains constrained. Instead of gradually moving down to four per cent, fiscal deficits have risen to 6.3 per cent of GDP due to lower economic activity, less than expected revenue mobilization and continuing untargeted subsidies particularly in the power sector and other loss making entities. The World Bank has said the major policy objective to reduce fiscal deficit at or below 3.5 per cent of GDP and improving tax-to-GDP ratio to 12.7 per cent by 2012-13 could not be achieved. Therefore, the lending programme would need to be extended from three to four years — from 2013 to 2014. The World Bank said that improvements in governance have not materialized. A range of governance, corruption and business environment indicators suggest that these areas remain a challenge. The targeted tax-to-GDP ratio has been missed. However, the Bank has noted that the broad based VAT was dropped (and instead the government introduced the reformed general sales tax (RGST) bill to the parliament), due to lack of political consensus. Only Sindh province has introduced RGST on services, the Bank said. No strategy for restructuring or privatization of public sector enterprises could be developed. But $800 million are expected in fiscal year 2012 budget as receipts from Etisalat, the buyer of Pakistan Telecom shares. Also, no closure on restructuring of any corporate entity is expected by end of 2014, it said.