Pakistan cuts development budget under IMF dictation
ISLAMABAD: Pakistan has reduced its development budget by Rs167 billion from Rs950 billion to Rs782 billion as part of the fiscal tightening measures required by the International Monetary Fund (IMF) under the $3 billion standby arrangement loan programme.
Sources in the Finance Ministry told HUM News English that Pakistan and IMF reached the staff level agreement on the budget cut during the first review of the loan programme, which was held in Islamabad from November 2 to 15 last month. The IMF Executive Board will take up the case of Pakistan in the second week of the current month.
The sources said that the Pakistani team, led by Caretaker Finance Minister Dr Shamshad Akhter, informed the IMF team about the steps taken to achieve the fiscal target of the current fiscal year. The IMF team was told that the government has revised the budget deficit target to 7.7 per cent of GDP, up from the original target of 6.5 per cent, due to the increase in debt servicing payments.
The government has estimated that the budget deficit will exceed the projected estimate by around Rs673 billion, from Rs7,505 billion to Rs8,178 billion, during the current fiscal year. The main reason for this increase is the rise in debt servicing costs, which are expected to reach Rs8,627 billion, up from the original budgeted estimate of Rs7,303 billion. The debt servicing on domestic debt will remain at Rs7,491 billion, while the debt servicing on external debt will remain at Rs1,022 billion, during the current fiscal year.
The government has also decided to increase the revenue target from the petroleum development levy (PDL) collections from Rs869 billion to Rs918 billion during the current fiscal year. The PDL is a tax imposed on the sale of petroleum products.
The reduction in the development budget will affect the implementation of various public sector projects, especially in the infrastructure and social sectors. The development budget is allocated for the projects under the Public Sector Development Programme (PSDP), which is aimed at improving the economic growth and living standards of the people.