Pakistan agrees to reduce budget deficit: IMF

[Lankan Ranger]

Pakistan agrees to reduce budget deficit: IMF

International Monetary Fund said on Friday that Pakistan has agreed to cut its budget deficit for this year.

In a statement issued in Washington, the IMF said “there was agreement on the need to reduce the budget deficit in the current financial year.”

“Looking ahead, significant fiscal consolidation will be needed in 2011/12 in order to reduce inflation and ensure debt sustainability,” it added.

The IMF also welcomed the recent efforts by the government to cuts its borrowing from the central bank.

Pakistan agrees to reduce budget deficit: IMF | Buisness | DAWN.COM

 

[ares]

They promised it last year also..they promised it to keep it at 4% and was later revised to 4.7% after floods but now it will be reaching around 7%..If they are serious about cutting down the deficit..they will have to make some very tough decisions considering their non productive expenditure.

eg 60% of Pakistani budget is used repayment of loans and its defense(WOT budget is not included)..they are two non productive sectors, which give no monetary returns..other than that a sizable portion of Pakistani budget goes in running (now) defunct loss making organisation like PIA , pakistan steel ..railways etc .

To achieve its targets pakistan will have cut these two non productive expenditures(defence and sell loss making organisations, as cutting down on debt financing is not in its hands and can only be done if international donors agree on it.)

Only other option is to cut down on productive expenditures(like development budget)..but that will just bring down its growth rate.
On the other hand it will have implement new taxes and cut down on subsidies.