4pc budget deficit targeted in FY 11/12

Updated at: 1336 PST, Friday, June 03, 2011
ISLAMABAD: Pakistan will aim to contain its fiscal deficit to 4 percent of gross domestic product in its budget for the 2011/12 fiscal year to be announced later on Friday, officials said, as the country tries to revive an economy hit by floods and militancy.

Pakistan had already been struggling since 2008 to keep its economy afloat with an $11 billion International Monetary Fund (IMF) loan, when the devastating floods last year inflicted another $10 billion in losses on the economy.

"For the next fiscal year starting July 1, we are aiming to contain the fiscal deficit to 4 percent," said one finance ministry official ahead of the budget announcement likely to be made at 5:00 p.m. (1200 GMT) on Friday.

Alongside floods, the growing cost of fighting Taliban insurgents and a sharp rise in global oil prices in recent months has also curbed growth, now estimated at a meagre 2.4 percent for the year ending June 30.

Finance Minister Abdul Hafeez Shaikh told reporters on Thursday the budget deficit for the outgoing year stood at 5.1 percent of GDP, but added that it could jump to 5.7 percent if it included 120 billion rupees ($1.4 billion) in circular debt -- a spiral that began in Pakistan's oil and gas sector in mid-2008.

State-owned utilities have defaulted on payments to gas distribution companies, which are then unable to pay for the gas they purchased. (Reuters)