Top News
Check latest news Read →

Fiscal account holds the key

The government is in need of liquidity generating flows primarily to bridge the deficit which has been exacerbated by fragile energy and security situation.

Latest fiscal accounts (9MFY10) validate this issue where fiscal deficit (4.2% of GDP & PRs626bn) has exceeded target on weak revenue mobilization (65% of budgeted).
 Also, with the deficit up, financing mix has formulated a problem for domestic liquidity with only 15% so far backed by external flows as against initial target of 50%.
 The natural recourse to this shortfall in 9MFY10 has been increased dependence on domestic sources, with domestic non-bank channel covering 51% of the deficit.
 Going forward, tax reforms & energy supply is the way to buttress fiscal space along with deficit financing mix which the government intends to address in the FY11E budget.
KASB Securities and Economics Research
2 June 2010

Leave A Reply