MoF plans to keep fiscal deficit at four percent: IMF review talks due on August 23

"We have to achieve some milestones such as asking provinces to reduce their deficits by mobilising more revenue and to cut some expenditures and increasing revenue by the federal government," Secretary Finance Salman Siddique said. The Finance Ministry is focusing fully on achieving macro stability.
"That four percent of the fiscal deficit is a sacrosanct figure and we would defend and achieve it with combined efforts of provinces and would announce before going to Washington for talks," Siddique said. In case of not achieving to that point will result in major macro disasters.
"In case we miss it we would be in much more trouble than we have ever imagined. We have no option then," he added. In case of reformed GST a recent meeting is expected to achieve the desired results where provinces will come on board, sources privy to the matter confided to Business Recorder.
The sources also said that another 5-6 percent increase in power tariff is also likely within this fiscal year and the plan for which is to be produced before the IMF in the talks. The plan for removing power subsidies is also taking shape and that has to be enforced.
Seemingly, fiscal balance will be achieved and some announcements to that end would be made before the Finance Ministry team leaves for talks. Provinces'' issue of raising salaries cost Rs 80 billion had created the deficit was also discussed and some measures are also sorted out with them in last few days in a committee of finance secretaries which is also reporting to the Finance Minister on a daily basis and the minister was very disappointed from the recent discussions which gave no headway unless these performance criteria is met.
Earlier these talks were scheduled on August 5 but were postponed because of mismatch in key macro data. Low tax collection of the FBR of Rs 1327 billion for last fiscal year has also weakened the revenue position and there are lesser hopes for any major financial gain unless reformed GST is implemented on October 1, 2010.