WEDNESDAY JANUARY 05: Efforts on to contain fiscal deficit below six percent: Waqar

ISLAMABAD: Secretary Finance Dr Waqar Masood on Tuesday said serious efforts are under way to contain fiscal deficit below 6 percent against 4.7 percent of the GDP agreed with the International Monetary Fund (IMF) for the current fiscal year.
Briefing the Senate Standing Committee on Finance here on the state of the economy, Waqar said the planning is under way to contain fiscal deficit for July-December 2010, which is expected to remain between 2.8 to 2.9 percent, 0.15 percent higher than the target.
"The government is contemplating serious measures to bring the fiscal deficit back on track," he said, adding that two important issues, accumulates subsidy and security related expenditure are creating problems of fiscal deficit. He said Rs 301 billion have been injected into power companies to clear the arrears on account of circular debt and despite that an amount of Rs 145 billion is yet to be paid.
In addition a significant amount is also struck on account of commodity circular debt because wheat was procured by the government more than the requirement of the country. Now, the government is trying to export the additional wheat through private sector. The Secretary Finance said the government has decided not to involve Trading Corporation of Pakistan (TCP) in export of commodities.
Waqar said another reason for fiscal deficit is lower tax to GDP ratio and as the International Monetary Fund (IMF) programme is off-track the support from other developing partners is also not coming. He said foreign inflows during the last two quarters were very low and the government is expecting some improvement in coming quarters, as the efforts are under way to resolve issues with the IMF.
He said the government will try to remove the IMF concerns that led to suspension of the programme. Secretary Finance was optimistic that inflows from Friends of Democratic Pakistan (FoDP) and $300 million of the Word Bank support would also come in the current fiscal year.
"We are trying to minimise government borrowings from the State Bank of Pakistan as it is adding to inflation, he said. Waqar said borrowing from the central bank has reduced substantially from Rs 307 billion after the inflows of Rs 60 billion on account of Coalition Support Fund (CSF) and Rs 40 billion profit of the bank at the end of December.
Replying to parliamentarians' questions, he said Rs 699 billion have been allocated for debt servicing and inflation was not Pakistan specific. The global phenomena and situation in Pakistan was not different from other countries. He said increase in commodity prices in the international market was major reason for high inflation in Pakistan, followed by government borrowings and Rs 950 per 40-kg wheat support price.