Financing a fiscal deficit of the anticipated 8.8 percent is a daunting task, and the government’s objective of bringing it down by 2.5 percentage points would seem too optimistic without relying on significant amount of additional financing.
Deposits held by Islamic banks in Pakistan have witnessed an impressive growth spurt in recent years. However, with the rapidly accelerating Islamic banking market, there comes a flush of surplus liquidity which harshly puts the brakes on the enthusiastic deposit mobilization drives of Islamic banks.
Just like the first two quarterly reports for the outgoing fiscal, the central banks latest report on The State of Pakistan Economy comes a little too late. Much of the newsworthiness of the report has been castrated, since the Economic Survey FY13 and FY14 budget has already announced some the key year-end numbers such GDP growth and its breakup and the fiscal deficit.
Finally all that budget hype is over; the initial wave of views, reviews, criticisms and praises has past. Its now time to see how the PML-N fared in light of the promises it made, and of the hopes thought leaders had initially pinned with a party enjoying a solid strength in the parliament.
Although the Federal Budget FY14 has failed to provide any concrete measures for addressing the structural fiscal imbalances plaguing this economy; it appears investors at local bourses didn receive the memo.
Its no secret that government borrowing has been increasing incessantly over the last couple of years. The problem is how the State Bank deals with the contrasting pressures of filling the governments loan appetite and yet ensuring the availability of private sector credit from commercial banks.
On multiple occasions during the budget speech, Finance Minister Ishaq Dar reminded that the tax to GDP ratio was much higher during his previous stint in office than it is at present. The references were apt considering what followed.