Budget 2014-15: GDP growth target revised upward

The government will also envisage a fiscal deficit of 4.8% of gross domestic product in the budget for FY15

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The country’s gross domestic product (GDP) rate edged up to 4.1% for the first time in the last six years but fell short of the targeted rate of 4.4% for the fiscal year 2013-14. The missed target, however, didn't stop the government from upward revising last year’s target from 4.4% to 5.1% for the fiscal year 2014-2015.

While presenting the Economic Survey 2013-2014, Finance Minister Ishaq Dar said the government would try to increase the growth rate by 1% every year taking it to 7% by 2017. The finance minister said that the estimated economic losses due to load-shedding were 1.5% to 1.75%.

The government also missed its target for containing inflation at 8% that accelerated to 8.5% in the first nine months of the fiscal year. The finance minister said the IMF had predicted that inflation would run into double-digits but the government managed to restrict it to around 8.5% despite increase in electricity tariffs.

The government will also envisage an overall fiscal deficit of 4.9% of gross domestic product or Rs1.4 trillion in the budget for FY15 against the fiscal deficit target of 6.3% last year. The government managed to bring down the fiscal deficit to 5.7% in FY14. However, the federal fiscal deficit is Rs1.711 trillion or 5.88% of GDP for the fiscal year 2014-15.  The overall fiscal deficit is calculated after factoring in the provincial balances surplus.



The main features of the government’s budget strategy are:

(a) GDP growth to gradually rise to 7.1% by FY 2016-17 from 4.14 in the outgoing fiscal year. The target for FY15 will be 5.1%.

(b) Inflation will be maintained in single digit throughout the medium term. Inflation currently stands at 8.5%.

(c) Investment to GDP ratio will rise to 20% at the end of medium term. Investment to GDP ratio currently stands at 13.5%. The target for FY15 will be 16.5%.

(d) Fiscal deficit to be brought to down to 4% of GDP by 2015-16 and maintained at this level afterward. The fiscal target for FY15 will be 4.9%.

(e) Tax to GDP ratio, which currently stands at 10.5%, will be increased 13% by the year 2016-17. The target for FY15 is 11.3%.

(f) Pakistan’s foreign exchange reserves, which currently stand at $13.9 billion, will be increased to more than $22 billion at the end of 2016-17 and $19 in FY15.

Note: The story will be updated as more analyses comes in.