Saturday, January 15, 2011

Budget deficit likely to rise to 6% of GDP

Budget deficit likely to rise to 6% of GDP 

ISLAMABAD: The budget deficit of the current financial year depicted a bleak picture in the midterm economic review meeting on Friday when it was informed that the deficits could reach Rs 1 trillion or around 6 percent of the Gross National Product (GDP).

The finance secretary, in his presentation, apprised the meeting of the budgetary position and probabilities at the close of the financial year. He also elaborated the impact of floods, war against terrorism, energy shortage and international price hike on the economy in general and the budget in particular.
The excessive defence expenditures due to the regional security environment, power sector subsidies and less than expected revenues and increase in international prices of commodities and oil were the main cause of increase in the budget deficit during the first half of the current fiscal year, the meeting was informed.
Earlier, the upward revised target of the budget deficit was Rs 852 billion or 4.7 percent of the GDP for 2010-11 subject to 1 percent budget surplus to be created by the provinces.
Chairing the meeting, Prime Minister Yousaf Raza Gilani ordered starting of an economic reconciliatory process with parliamentary leaders of various political parties to develop consensus on economic challenges, official sources said on Friday.
He said the economic challenges would be shared with all the political leadership of parliament to seek their proposals. “The objective behind the reconciliatory process and consultation with political leadership is to develop consensus and take decisions in the larger national interest,” he said.
The economic review meetings are held regularly every month so as to keep political leadership aware of the economic situation.
The prime minister approved a five-member committee, headed by the finance minister, to discuss the economic situation with all parliamentary parties. The committee has been directed to immediately contact the leadership of the parties to ascertain their availability for consultation on national economic challenges.
The finance minister also briefed the participants on the state of national economy and the economic challenges in wake of the devastating floods, war against terrorism, national security needs and international
The main objective of the economic reconciliatory process would be to bring on board and develop consensus among all the political parties on the tax reforms, including Reformed General Sales Tax, to steer the economy out of the financial difficulties.

The fast approaching visit of the International Monetary Fund (IMF) to negotiate the revised performance benchmarks under the stalled $11.3 billion IMF Stand-By-Arrangement requires the country to agree with a road map for resource mobilisation and reduced dependence on local and foreign borrowing, the sources said.

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