According to newspaper reports, the International Monetary Fund has told the government to cut its development budget by 27 percent to contain fiscal deficit within limits and even off the revenue shortfall during the current fiscal year. In fiscal terms, the government will have to cut the development budget by Rs1.111 trillion against Rs1.513trillion approved by parliament and four provinces in June 2015. The fund also requires the government to limit the expenditure of Public Sector Development Programme at Rs611billion, down 13 percent against Rs700 billion authorised by parliament. The annual development plans of the four provinces will be reduced to Rs500 billion against Rs 813billion allocations by the four provincial assemblies. Earlier, the government assured the IMF that it will lower the budget deficit to place the debt-to-GDP ratio on a downward trajectory and maintain macroeconomic stability to achieve sustainable and inclusive growth.
The government is planning to limit the fiscal deficit at 4.3percent of the GDP and assured the fund that it will sustain fiscal consolidation despite missing the target of the budget deficit in the first quarter of 2015-16. It is hoped that government will not ignore the priority areas of the development programmes, including infrastructure, education and healthcare to improve the living standard of the people and safeguard the interests of the vulnerable segments of society. As education, health and social sectors are now the provincial subject, the provinces have agreed with the federal government to maintain the development programmes at 6.5 percent of the GDP despite the collections of the provincial revenues will likely to stay at 1.1percent of the GDP. The Finance Ministry is coordinating with provincial governments to develop a mechanism to gain financial stability on the provincial level during the current fiscal year.
As the government is persuading the IMF for the next tranche of loan, it has failed to introduce any austerity measure on the official level. The business community is already under pressure due to various reasons, including energy crisis, terrorism, rising cost of production and cancellation of orders from foreign buyers which is causing decline in the export volume. It seems the government’s fiscal and economic policies revolve around a one point agenda, how to qualify for foreign loans ignoring the implications of the piling up burden on this nation. The volume of loan is speedily heading towards a breaking point as the country will be no more in a position to get further loans once it reaches the $90 billion benchmark. Therefore, the time has come the government should concentrate on improvement of the financial, economic and industrial order in the country.
