The International Monetary Fund has projected that Pakistan’s national development budget will be cut by 25%, or Rs377 billion, for fiscal year 2016 in order to achieve the overall budget deficit target of 4.3% of total size of national economy, reported Tribune. The Washington-based lender also projected that, as a result of lower development spending, the government will miss its economic growth rate target of 5.5%.The IMF is projecting that the government will only be able to spend Rs1,136 billion on development this fiscal year, as opposed to the Rs1,513 billion approved by the National Economic Council, the steepest cut in recent years. The bulk of the cuts will be borne by the provincial development budgets, which will collectively lose Rs313 billion, or 38.5% of their budgeted Rs813 billion. The federal development budget, by comparison, will only lose 9%, or Rs64 billion, of its budgeted Rs700 billion, the IMF projects. The steep cut in the development spending will not only adversely affect current year’s economic growth rate but also delay many critical infrastructure projects due to a lack of funding. Against the official target of 5.5% GDP growth, the IMF has projected that Pakistan’s economy will grow at a pace of 4.5% this year. The IMF, in its latest projections of the Pakistani economy, has said the country would have to reduce its development budget by 25 per cent that would see the amount come down from Rs1.51 trillion to Rs1.13 trillion. This essentially means that Pakistan will miss its economic growth rate target of 5.5 per cent, which also does not surprise many since the goal was a highly ambitious one from the outset. While it was not unachievable, most felt the target will likely be missed since there weren’t concrete steps taken in that direction. Most of the blame for the ills plaguing the economy can be placed on low tax collection. Provinces will be seeing a cut in infrastructure spending since their share of tax collection, to be forwarded by the centre under the NFC award, will fall below the target. All the IMF’s projections can be traced back to poor tax collection, with taxpayers proving to be an unreliable source revenue-generation. Provinces don’t spend a lot on infrastructure development in any case and telling them that a steep cut is in the offing only makes matters worse. Raising the rates of indirect taxes will not be enough either, this time around.
pk.shafaqna.com
