KARACHI: Exports have shot up and import bill has come down, while tax net remained restricted to the few being taxed already, State Bank of Pakistan’s annual report on the state of economy for the year 2012-13 has revealed. In addition to this domestic debt has increased to Rs 1.9 trillion.
The report said global commodity prices’ downward trend helped contain Pakistan’s import bill, and there was some improvement in exports.
SBP report said that challenges in managing public sector enterprises; the need to expand the tax net to untaxed or under-taxed areas; containment of untargeted subsidies; tackling theft and leakages in the energy sector; revitalization of the private sector; and increase in documentation, were largely unaddressed during FY 2012-13.
“In a repeat from the previous year, the budget deficit exceeded the target for FY 2012-13 by a wide margin, as the realized deficit was 8.0 percent of GDP, against a target of 4.7 percent,” said the report.
It added that the resulting pressure to secure financing, dominated policymaking throughout the year. For the third consecutive year, the energy sector was addressed by paying off the circular debt, which pushed the fiscal deficits above the respective targets for these years.
The report said that with inadequate external funding, the onus of financing the fiscal deficit fell entirely on domestic sources, specifically the banking system. The government borrowed Rs 939.6 billion from commercial banks, and an additional Rs 506.9 billion from SBP. In effect, Pakistan’s domestic debt has increased to Rs 1.9 trillion, a 24.6 percent increase.
According to the report, lack of external inflows also created challenges in financing the relatively small current account deficit.
The financial account recorded a net inflow of only $ 0.3 billion during the year, compared to $ 1.3 billion last year and $ 5.1 billion in FY 2010-11.
This, along with significant repayments to the IMF, pulled down SBP’s liquid forex reserves to a 55-month low of $ 6.0 billion by end-June 2013.
According to the report, SBP projects GDP growth in the range of 3.0 – 4.0 percent for FY 2013-14, which is higher than the IMF’s growth forecast of 2.5 -3.0 percent.
While, inflation outlook based on October 2013 data, reported earlier, was in the range of 10.5 to 11.5 percent, a more realistic outlook based on latest data shows average inflation for FY 2013-14 to remain between 10 and 11 percent.
It further said that the approval of a 3-year ($ 6.64 billion) Extended Fund Facility from the IMF, and expected financial support from other IFIs, should bring stability to the domestic forex market in FY 2013-14.