Sign in Subscribe
  • E-Papers
    • Profit Magazine
    • Pakistan Today
  • Headlines
  • Featured
  • Opinion
    • Comment
    • Editorial
  • Tech
    • Artificial Intelligence
  • World
  • Satire
Sign in
Welcome!Log into your account
Forgot your password?
Create an account
Sign up
Welcome!Register for an account
A password will be e-mailed to you.
Password recovery
Recover your password
Search
Sign inSubscribe
Profit Profit by Pakistan Today
Profit Profit
  • E-Papers
    • Profit Magazine
    • Pakistan Today
  • Headlines
    • Headlines

      Pakistan secures $200 million tuna quota in historic IOTC breakthrough

      Headlines

      Finance Act limits IRO deployment to business premises, expands monitoring scope…

      National Savings
      Headlines

      Net receipts from national savings schemes decline to Rs27.5 billion in…

      Headlines

      Punjab govt launches Rs3,000 monthly ration subsidy for 1.2 million families

      Energy

      Govt mulls lifting gas connection ban as LNG surplus strains supply…

  • Featured
    • News Analysis (Premium Content)

      Classified: Govt looking for Digital Czars to rule your life

      PARTNER CONTENT

      Pakistan’s Future Food Security Tied to Strategic Palm Oil Partnerships

      Editor’s picks

      How the courts hold back financial justice

      Editor’s picks

      Eye on the sky: The race to connect Pakistan’s forgotten corners

      Cover story

      The declining returns to emigration

  • Opinion
    • AllCommentEditorial
      Comment

      Unlocking Pakistan’s digital potential: why a smarter approach to 5G is…

      Comment

      Pakistan’s tech sector: From outsourcing hub to global innovation partner

      Editorial

      Painfully Deja Vu

      Editorial

      Growth on paper, stagnation on ground

  • Tech
    • AllArtificial Intelligence
      Tech

      Nvidia nears $4 trillion and temporarily tops world’s most valuable list

      Artificial Intelligence

      EU delays AI code of practice rollout to end of 2025

      Huawei
      Tech

      US semiconductor company settles export case for $4.25 million over Huawei…

      Tech

      OpenAI says it is not part of Robinhood token offer

  • World
  • Satire

Mini-budget supports exports, but increases fiscal consolidation challenges: Moody’s

It projected the deficit to widen to 6% of GDP in fiscal 2019 due to revenue growth possibly being below government forecasts, slower economic growth and the new revenue-based incentives.

By
Mohammad Farooq
-
January 31, 2019
0
465
Facebook
Twitter
Linkedin
WhatsApp
Email

    LAHORE: Moody’s in a report released on Thursday said the recently announced mini-budget supports exports but will increase fiscal consolidation challenges for the government.

    According to the rating agency, there is a greater risk of fiscal slippage and slower fiscal consolidation in the dearth of further revenue-raising measures.

    It noted that the mini-budget announced on 23rd January greatly concentrates on revenue-based measures to improve supply-side conditions for businesses and incentivize domestic reinvestment.

    Also, if successful, the measures will assist the country’s manufacturing sector, promoting exports and import substitution and help narrow the current account deficit.

    Due to the dearth of new spending cuts or revenue-raising measures, Moody’s said these measures will keep Pakistan’s budget deficits wider for longer, likely undermining the credibility of government efforts to achieve fiscal consolidation.

    And highlighting the previous mini-budget announced in September last year which focused on spending cuts, the second one is aimed at improving business conditions, including for manufacturers and exporters by reducing or removing existing taxes that erode profit margins or disincentivize reinvestment.

    Moody’s said specific measures announced include a decrease in import cotton duties on essential raw materials, the abolition of tax on retained earnings and incentives for the agriculture, which constitutes for roughly 20% of the country’s exports.

    The report said the country’s revenue base was a narrow 15.4% of GDP in FY18 which ended June 2018.

    It added the current government presented limited revenue-raising measures, especially taxes on large vehicles and high-end mobile phones.

    Consequently, the mini-budget put greater emphasis on improvement in tax administration and spending restraint for it to meet its deficit target of 5.1% of GDP.

    It projected the deficit to widen to 6% of GDP in fiscal 2019 due to revenue growth possibly being below government forecasts, slower economic growth and the new revenue-based incentives.

    The rating agency said the deficit would narrow to 5% by fiscal 2021, as the economy picks up.

    And it believed the PTI government remains devoted to fiscal consolidation, however, a wider for longer deficit could raise questions over the credibility of its fiscal policy.

    As per Moody’s, the mini-budget comes amid low export growth for the first half of FY19, despite the Pakistani rupee’s 25% decline against the US dollar since December 2017.

    Additionally, the government is trying to narrow the current account deficit by decreasing some of the tax distortions exporters face.

    Aside from weak exports, the rating agency noted Pakistan’s current account dynamics have been largely positive in recent months.

    On a year-on-year basis in dollar terms, remittances increased 10 in the first half (July-December) of FY19, while goods imports sharply contracted to about 3% YoY as non-fuel goods imports declined.

    It projected the current account deficit to narrow to 4.7% of GDP in FY19, 4.2% in FY20 compared to 6.1% in FY18, however, it will remain sizable and wider than it was in 2013-16 fueling the country’s external financing requirements.

    Source: Moody’s

    Pakistan has obtained $12 billion in financing from Saudi Arabia and the United Arab Emirates, amounting to $6 billion each respectively and divided equally between deposits and deferred oil payments, which is likely to cover its net financing needs for FY19, said Moody’s.

    But the rating agency cautioned a net financing gap beyond FY19 remains due to the still sizeable current account deficit.

    Moody’s said negotiations are ongoing with the International Monetary Fund (IMF) over a new programme which would provide a stable additional source of external funding besides technical support and assistance on macroeconomic rebalancing and structural reform policies.

    Moreover, Pakistan is also in discussions with other countries like China and Qatar, multilateral lenders such as the Asian Development Bank (ADB), the International Bank for Reconstruction and Development (IBRD) and the Islamic Development Bank over external funding support to bolster its external position, the rating agency concluded.

     

    • TAGS
    • current account deficit
    • External financing gap
    • Finance Minister Asad Umar
    • Financial Support package from UAE and Saudi Arabia
    • Fiscal Consolidatiion
    • fiscal deficit
    • Mini-Budget 2019
    • Revenue collection
    • saudi arabia
    Facebook
    Twitter
    Linkedin
    WhatsApp
    Email
      Mohammad Farooq
      The author is an Assistant News Editor at Profit by Pakistan Today. His works have been published in Dawn, Express Tribune, LiveMint India, Huffingtonpost India and The News on Sunday. He tweets @MohammadFarooq_

      RELATED ARTICLESMORE FROM AUTHOR

      Headlines

      Current account deficit narrows by 91% in October, stands at $74m

      Top News Updates

      SBP projects 2-3 % GDP growth in 2023-24

      Headlines

      Current account remains in surplus for 9MFY21

      Whatsapp Newsletter
      Email Newsletter News Tips
      Profit by Pakistan Today
      Publishing Editor: Babar Nizami -- Editor Multimedia: Umar Aziz Khan -- Senior Editor: Abdullah Niazi -- Editorial Consultant: Ahtasam Ahmad -- Business Reporters: Taimoor Hassan | Shahab Omer l Zain Naeem | Nisma Riaz | Mariam Umar | Hamza Aurangzeb | Shahnawaz Ali | Ghulam Abbass | Ahmad Ahmadani | Aziz Buneri -- Sub-Editor: Saddam Hussain -- Video Producer: Talha Farooqi -- Director Marketing : Mudassir Alam | Regional Heads of Marketing: Agha Anwer (Khi) | Kamal Rizvi (Lhe) | Malik Israr (Isb ) -- Manager Subscriptions: Irfan Farooq -- Pakistan’s #1 business magazine - your go-to source for business, economic and financial news.
      Contact us: [email protected]
      • Privacy policy
      Copyright © 2025. Pakistan Today. All Rights Reserved.