The Sate Bank of Pakistan has indicated that a fiscal pressure is expected to mount if proceeds from Coalition Support Fund and Friends of Democratic Pakistan (FoDP) pledges are not realised. According to SBP''s second quarterly report on Pakistan''s economy, key fiscal indicators improved in Q2-FY10 over the previous quarter bringing the cumulative fiscal deficit for H1-FY10 to 2.7 percent of annual estimated GDP.
The improvement in revenue growth during Q2-FY10 is largely due to increased direct taxes collection, which was to be expected given that the traditional first quarter receipts had been pushed into the second quarter following the extension of the deadline for filing income tax returns, the report says.
Moreover, tax collection was also helped by a revival in the economy and a rise in rupee value of imports. "Going forward, a fiscal pressure is expected to mount if proceeds from Coalition Support Fund and FoDP pledges are not realized, while another concern on fiscal front is the increased volume of contingent liabilities issued by the government to the Public Sector Enterprises," the SBP said in report In addition to the guarantees already issued to many PSEs, government is now issuing guarantees on TCP and PASSCO commodity financing loans. Such activities not only understate the volume of the public debt stock and pose a risk of increasing future liabilities but also potentially crowd out private investment, it adds.