MONDAY JULY 02: Fiscal deficit will soar to six percent of GDP or more: Hafeez meets Prime Minister

ISLAMABAD: The government is unlikely to achieve revenue collection target of Rs1,952 billion for fiscal year 2011-12 and an expected shortfall of Rs 42 billion would increase the fiscal deficit to around 6 per cent of the GDP, excluding 1.9 per cent deficit on account of consolidation of electricity and commodity arrears.
Briefing Prime Minister Raja Pervez Asharf on economic situation on Sunday, Finance Minister Dr Abdul Hafeez Sheikh said that fiscal year 2011-12 has ended "with a record level of tax revenue collection that is expected to surpass Rs1,910 billion - an increase of Rs450 billion, showing a growth rate of 23 per cent, the highest level of growth in single year in Pakistan's history".
Sheikh stated that the fiscal year 2011-12 ended with GDP growth of 3.7 per cent for the year, which remains 0.5 per cent less than 4.2% GDP growth target estimated in the budget.
The minister said that growth of 3.7 per cent is presenting an improvement over last three years. According to a statement issued here, the minister said that better performance of the economy is visible from the decline in the rate of inflation from 13 per cent last year to 11 per cent in the year just concluded.
The benefit of decline in international fuel prices, Sheikh said, has been passed on to consumers and in the last 45 days, prices of fuel, diesel and kerosene have been brought down three times. He said that the financial year has also ended with foreign exchange reserves over 15 billion dollars, in spite of paying back the IMF 1.2 billion dollars during the year as per the schedule. And export growth remained strong on the face of global economic crisis and is likely to maintain upward momentum in the year 2012-13 as well. The remittances remained at a historic high level over 13 billion dollars for which the government is highly appreciative for the role of expatriate Pakistanis. The financial year 2011-12, Sheikh claimed, also ended with successful completion of Federal Public Sector Development Programme (PSDP) with projects benefiting the economy worth Rs 300 billion were undertaken showing 100 per cent utilisation and completion of more than 200 projects.
The minister also briefed Raja Pervez Ashraf regarding the revival plan of Pakistan Steel Mills (PSM) for which allocation has been made by Ministry of Finance to ensure the success of the new management of the Steel Mills and to gradually increase the output from present 20 per cent utilisation to 80 per cent utilisation of the Steel Mills capacity to become profitable.
About energy issue, the minister said that the recent improvement in the production of electricity sector from 10,000 MW to about 14,000 MW has given a relief to the public but greater efforts would be required from the management of the electricity sector and relevant ministries to overcome this challenge on a fast track basis.
The Prime Minister expressed his satisfaction at the economic stability and appreciated the successful efforts of the team under the leadership of the Finance Minister and directed that prudent economic policies should be continued. He also directed that the incoming year's PSDP allocated to projects based on regional balance and completion of on-going projects show that the maximum benefits can be made available to the public especially the people belonging to Balochistan, FATA and other less developed regions of the country. Finance Minister Dr Abdul Hafeez Sheikh also gave an update on the working of the Cabinet Committee on Energy.