Pakistan targets deficit of 6.54% in fiscal year from July

By Asif Shahzad and Gibran Naiyyar Peshimam

ISLAMABAD (Reuters) -Pakistan’s government will target a budget deficit of 6.54% of economic output in the fiscal year starting on July 1, the finance minister said on Friday, slightly below the current year’s revised estimate of 7%.

Finance Minister Ishaq Dar announced the target during a speech to the national legislature on the government’s annual budget. A source had said earlier in the day the budget was seen targeting a deficit of 7.7% of GDP for the 2023-24 fiscal year, which starts on July 1.

The deficit target for the fiscal year ending this month had been revised higher, from a previous projection of 4.9%.

The budget needs to satisfy the IMF to secure the release of stuck bailout money for the crisis-struck country, which is due to hold a general election by November.

Dar said the government had prepared “a responsible budget, not an election budget.”

The total spending target would be 14.46 trillion rupees ($50.45 billion), Dar said, with 1.8 trillion rupees going to defence. It would target debt servicing of 7.3 trillion rupees.

Dar reiterated that the government hoped to get an agreement with the IMF soon, echoing comments made earlier in the day by Prime Minister Shehbaz Sharif as he addressed his cabinet.

Sharif’s government is hoping to persuade the IMF to unlock at least some of the $2.5 billion left in a $6.5 billion programme that Pakistan entered in 2019 and which expires at the end of this month as the country deals with a series of economic and political crises.

The budget would target total tax revenue of 9.2 trillion rupees, said Dar, who added there would be no new tax on the industrial sector.

Inflation for the next fiscal year is expected to come in at 21%, Dar said, as Reuters reported earlier this week. Inflation in May was at a record high of nearly 38%.

($1 = 286.6100 Pakistani rupees)