Pakistan’s Finance Minister Asad Umar said the government’s budget deficit is expected to swell as a previous forecast was unrealistic in the face of a deepening financial crisis.
The shortfall may widen to as much as 7.2 percent of gross domestic product this financial year through June, Umar told parliament in Islamabad on Tuesday as he announced an emergency supplementary budget. The budget deficit for last year is now estimated at 6.6 percent, overshooting an earlier 4.1 percent target.
“The previous government’s budget was unrealistic,” Umar said. “Foreign exchange reserves have dropped to a dangerous level with cover less than two months of imports.”
The mini-budget was announced before Prime Minister Imran Khan headed to Saudi Arabia on Tuesday for a 2-day visit, his first foreign trip as premier since winning a July national election.
It also coincided with army chief General Qamar Javed Bajwa’s visit to Beijing this week as he looked to bolster ties and support for China’s Belt and Road trade route that runs through Pakistan. Khan’s administration is hoping to avoid an International Monetary Fund bailout by tapping up friendly countries for funds.
Umar estimated that the current-account deficit would continue to widen this year to as much as $21 billion.
Pakistan allocated 750 billion rupees ($6 billion) on development spending for the current fiscal year, compared with 1 trillion rupees earmarked by the previous government’s pre-election budget. The allocation was higher than expected and led to a rally in cement and steel stocks.
The South Asian nation plans to generate 183 billion rupees by increasing taxes on luxury cars and imported food items. Pakistan also ended taxes on raw material imports for export industries to make them competitive to regional countries, including Bangladesh.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.