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ISLAMABAD: The Finance Ministry has stated that the sharp (V-shaped) economic recovery after the control of Covid-19, coupled with the international market dynamics in response to the Russia-Ukraine conflict, has put the country into a crisis in terms of higher fiscal deficit. Fiscal policy statement 2023 uploaded on the ministry’s website added that furthermore, the unattended issues of the energy sector and a sharp rise in domestic and external debt during the last few years put fiscal sustainability at risk.

To put the country on the right track, revenue mobilization through broadening and deepening the tax base, rationalizing exemptions, and simplifying procedures would be critical factors. Looking into the challenges for large deviations of non-tax revenue collections should be the government’s priority. Further, on the expenditures side, there is a need to curtail the total expenditures, especially the current expenditures, within the budget estimates. It requires rationalization of subsidies to the energy sector.

Though the devastating flood has negatively affected agricultural production, the government is putting efforts into achieving sustainable growth in industrial and services sectors, including agriculture. However, global and domestic demand reduction is being witnessed, which is expected to hurt economic growth and revenue collections.

Budget deficit: PIAF calls for controlling govt expenditure, high cost of debt servicing

But all efforts are being put in place to achieve a sustainable fiscal deficit. Government is also committed to dealing with the long-standing financial issues of the energy sector. The financially viable resolution of this issue is expected to mature in the coming month or so, which will further create policy space for a permanent solution.

For FY2023, economic growth is likely to remain below the budgeted target due to the devastation created by floods. This combination of low growth, high inflation, and low official reserves is particularly challenging for policymakers.

Against the actual CPI inflation of 12.2 percent during the last fiscal year, the budget target is set to achieve enormously challenging (due to ongoing stagflation in the world) CPI inflation of 11.5 percent.

Copyright Business Recorder, 2023

Comments

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Haroon Apr 04, 2023 04:44am
The only thing causing fiscal deficit crisis is the government. The government must be forced to slash its expenditures! All these reasons are just excuses.
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Tulukan Mairandi Apr 04, 2023 08:50am
Real factors missing are subious trade with India routed through Dubai. Karachi is packed with Dabur, Himalaya and Yardley products that are apparently "made in UAE", which isn't true. Besides, unscrupulous importers are bringing in indian excrement as "bharat halva", which are being served to our people. The next factor is imbalanced trade with iron brother China, and outflow of our foreign money to Kabul.
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Muhammed Apr 04, 2023 11:44am
Put complete ban on foreign travel by all & sundry except exporters. Ban imports of all those stuff displayed on the shelves of supermarkets. Take out the subject of AGRI TAX from provincial domain & include it in federal list.
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KU Apr 04, 2023 12:48pm
The thumb rule is economic crises are based on common sense decisions, to divert funds to sectors that support the economy. If anything has come out of the situation we are in, it is the incompetence of all and sundry, including those who call themselves the cream of the administration. Our public sector is governed by those who are interested in either making money or a career that spans from salary to pension, and we are led to believe that we are in safe hands.
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Haider Apr 04, 2023 08:56pm
Sorry to say to all Finance Ministry that under your own command mispresentation is in process and no one try single time to control loss or illegal payments of Foreign reserve in Mission Abroad whole CAO MoFA,MoD under shade of MAG ,zero post audited of Expenditure incurred by virtue of Concern Embassies specially Europe,America etc and MoF clear order regarding payments of TA/DAs across the World, where are Post Audited system of Original Vouchers by Self Entities,i.e MAG,AGP,CGA etc??? Since Pak independent no one take serious action to control these Expenditures which not losing our Foreign reserve,non productive usage, if anybody is sincere,loyal with this Poor Nation, immediately Posting transfer method should be revive as India took strict budget control action.hope Soon strict action will be on board to save our Foreign Reserve.
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