ISLAMABD - The International Monetary Fund (IMF) has estimated that Pakistan’s budget deficit, tax collection and debt would improve in the current fiscal year.
Pakistan’s budget deficit, difference between the expenditures and revenues, is projected at 4.8 percent for the ongoing financial year (FY23) as compared to 7.8 percent in FY22, according to the IMF’s latest report, ‘Fiscal Monitor 2022’. “The FY2022/23 projections for Pakistan are based on information available as of the end of August 2022 and do not include the impact of the recent
floods,” the report stated. The budget deficit is estimated to reduce to 4.1 percent in the next fiscal year. According to the report, the primary budget would remain in surplus of 0.2 percent in FY23, which was in deficit of 3 percent in the previous fiscal year. In the next fiscal year, the primary budget would remain in surplus of 0.6 percent. The government revenue to GDP is estimated at 12.1 percent in FY23, which was 12.4 percent in FY22. It would increase to 12.8 percent in the next financial year. On the other hand, the expenditures to GDP are projected to decline 17.2 percent in FY23 from 19.9 percent of the last fiscal year. The IMF has also estimated that the country’s debt would decline in FY23. The government’s gross debt to GDP is projected from 77.8 percent in FY22 to 71.1 percent in FY23. Meanwhile, it would further decline to 66.0 in the upcoming financial year. Similarly, the general government net debt to the GDP is estimated to reduce to 66.1 percent in FY23 from 71.5 percent in previous year. “Rising inflation and climbing interest rates have supplanted more than a decade of muted inflation and low interest rates in many countries. Recession concerns are surfacing and geopolitical tensions have increased further as Russia’s invasion of Ukraine persists (October 2022 World Economic Outlook). Fiscal policy trade-offs are increasingly difficult, especially for high-debt countries where responses to the COVID-19 pandemic exhausted their fiscal space. Households are struggling with elevated food and energy prices, raising the risk of social unrest,” the report stated. In 2021 and 2022, the fiscal deficits have fallen sharply in advanced and emerging market economies but remained larger than prepandemic levels across income groups. The contraction in the average deficit for advanced economies and emerging market economies (excluding China) is notable, reflecting the unwinding of pandemic-related measures amid rising inflation.