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Problem of fiscal deficit

Problem of fiscal deficit

Pakistan’s exports have experienced a free fall during the first half of the current fiscal year, belying the government’s claim that it has maintained fiscal stability. The fiscal deficit have reached 2.4 percent of the gross domestic product during the period in review, revealing a hard fact that the government has failed to control the situation. Since the completion of a three-year extended facility programme of the International Monetary Fund in September last year, the government seemed to have relaxed its fiscal discipline. But problem originates from trade and industry which could not produce export surplus. Experts believe the deficit would reach eight percent of the GDP at the yearend as the government is also facing circular debt of Rs 480 billion. The circular debt is a new phenomenon appearing on the economic scene in recent years. In the budget for 2016-17, the government wanted to contain fiscal deficit to certain limit and it is yet to be seen which way the situation moves. The full year deficit reached 4.6 percent during 2014-15,at least 5.3 percent in 2014-15 and 5.5 percent in 2013-14.The deficit have crossed Rs799 billion in monetary terms during the first six months of the current fiscal year from Rs515 billion a year ago.

According to experts, the government will have to take some hard steps to maintain fiscal discipline and increase exports. The situation is not normal and all is not well on the economic front. The opposition parties, regardless to their political agenda, should also support the government to come out of economic mess. Currently, the opposition groups are creating troubles even in the way of development projects and this is something which needs to be taken into account seriously. On the government’s part, it needs a fulltime finance minister which should maintain and monitor fiscal stability. The past performance shows the government has failed to control its expenditures which have increased by 5.6 percent of the GDP from 6.5 percent a year ago. There is no concept of austerity drive and the hard earned funds are mostly used on non-productive sectors. Apart from the circular debt, the fiscal deficit are on the rise and the government seemed unable to increase exports despite announcing a huge package for the export sector.

On another note, the Finance Ministry has revealed a discrepancy of Rs58billion in the government funds during its six month accounts. The provinces are also need to streamline their financial affairs as after the 18th amendment to the constitution, they are responsible to keep their accounts in order.