Budget 2010-11

[Lahore_Real_Estate]

ISLAMABAD: The world is not ready to extend financial assistance for budgetary support to the PPP-led regime up to the desired level apparently because of perception of inefficient governance in Pakistan as well as negative multiplier effects faced by the modern economies in the wake of the world financial crisis, it is learnt.

The situation is making the task of budget makers 2010-11 more difficult to manage the gap between revenues and expenditures.

“We have estimated to receive net foreign inflows of 0.8 per cent of the GDP in 2010-11 compared to 1.5 per cent of the GDP in accordance with the revised estimates of 2009-10,” an official, who is involved in the budget making process, confirmed while talking to The News the other day.

The budget makers, in consultation with the IMF staff, have estimated almost 50 per cent decline in foreign inflows for budgetary support in next fiscal year 2010-11 compared to the revised estimates of the outgoing financial year 2009-10. The scarcity of foreign inflows for budgetary support aggravated this situation as the International Monetary Fund (IMF) has flatly refused to allow Islamabad to continue with the practice of utilising one portion of its borrowed money for budgetary support in next financial year 2010-11, the official said.

The IMF had granted this unusual facility of using one portion of its extended money for budgetary support in order to fulfil the gap owing to non-fulfilment of the Tokyo pledges made by Friends of Democratic Pakistan (FoDP) in outgoing fiscal year.

Two budget deficit targets have been envisioned, one is four per cent of Gross Domestic Product (GDP) with Value Added Tax and the second is 4.2 to 4.5 per cent of the GDP without VAT for 2010-11.

“We have clearly informed the IMF that the fiscal deficit target of 3.5 per cent of the GDP is out of question because it will not enable the government to present its budget,” said a senior official of Finance Division.

The one per cent of GDP will be equivalent to Rs 170 billion in the next fiscal year, so net 0.8 per cent of GDP foreign inflows will translate into estimated Rs 136 billion from multilateral and bilateral creditors for budgetary support in the next financial year.

During the outgoing financial year 2009-10, the one percent GDP is equivalent to Rs 146 billion, so 1.5 per cent GDP in terms of net foreign inflows is expected to provide Rs 219 billion in the outgoing fiscal year.

The sources said that the working done by the Economic Affairs Division (EAD) showed bleaker picture in terms of foreign inflows in the upcoming financial year that also perturbed the high-ups of EAD.

“The EAD had so far estimated 0.5 per cent of GDP net foreign inflows in the next fiscal because the project loan reduced because the government did not approve bulk of new development projects for the Public Sector Development Programme (PSDP) in the next financial year,” said a senior official.