Pakistan 2009/10 budget deficit above IMF target

KARACHI- Pakistan’s budget deficit for the fiscal year 2009/10 (July-June) swelled to 6.3 percent of GDP, wider than the targeted shortfall agreed with the IMF of 5.1 percent, Finance Ministry figures showed on Tuesday.

The deficit in fiscal 2008/09 was 5.2 percent.

“This will keep pressure on the central bank to keep a tight monetary policy and it is also not good for sovereign ratings,” said Asif Qureshi, director at Invisor Securities.

The government had planned to reduce the deficit to 4 percent in 2010/11, but analysts expect the shortfall to be bigger because of the cost of relief and rebuilding related to the massive flooding in the country.

“The fiscal deficit will widen considerably to nearly double the programmed amount …on account of higher spending and cyclically lower revenue collection,” said Moody’s Investor Service.

Pakistani and International Monetary Fund (IMF) officials are meeting in Washington to review the approval of the sixth tranche of an $11 billion loan and to try and work out the impact to the economy from the floods. They said they would review all options.