ISLAMABAD: Amid the possibility of downward revision in the GDP growth as a direct consequence of the recent flash floods, Pakistan and the International Monetary Fund (IMF) are heading towards making adjustments in the budgetary targets for the current fiscal year, The News reported on Monday.
Initially, it was assessed that the floods might not have caused devastation, but now the Rapid Need Assessment (RNA) undertaken showed that the losses were rising and estimated at Rs650 billion in all the four provinces.
However, the losses and needs might go up further as the international donors have not yet firmed up their assessment.
In order to unlock staff-level agreement under $7 billion Extended Fund Facility (EFF) and Resilience Sustainability Facility (RSF), Pakistan and the visiting IMF review mission are all set to finalise the budgetary framework for the current fiscal year.
Under the revised budgetary framework, the Federal Board of Revenue's (FBR) tax collection target will be revised downward from Rs14.13 trillion to Rs14.001 trillion, while the non-tax revenue target will also be slashed.
"The provinces have undertaken Rapid Need Assessment (RNA) and estimated losses of around Rs650 billion caused by the recent flash floods; however, the consortium of international donors, comprised of World Bank, Asian Development Bank, European Union, and United Nations Development Programme, has yet to validate the losses estimated by the federating units.
"There are certain gaps which have not yet been incorporated in the estimated losses,” top official sources confirmed while talking to The News here on Sunday.
On the GDP growth, the government envisaged a growth rate of 4.2% for the current fiscal year, and in the initial assessment, it was assessed that the floods might cause a downward revision from 4.2% to 3.9%.
Initially, the damage assessment estimated losses of Rs371 billion, but now it would definitely go up.
When asked by a senior official, he said that the initial assessment showed loss and damage caused by floods till September 15, but now the losses have gone up.
Now it’s assessed that the GDP growth might cause a loss more than the initial assessment. The GDP growth might have evaporated in the 0.6% to 1%, resulting in adjustments in the macroeconomic framework.
With revision in the macroeconomic, it might pave the way for revision in the fiscal framework under which the FBR tax collection target and non-tax revenue target would be revised downward. With revision in the FBR's tax collection, although it was expected to a marginal but it would have effects on the revenue surplus envisaged by the provinces to the tune of Rs1,465 billion for the current fiscal year.
On the expenditure side, the government will have to make adjustments, but the federal government might prefer not to slash down the Public Sector Development Programme (PSDP) publicly, but it might opt to slow down the releases of the PSDP funding.
However, the government has made internal adjustments in the PSDP projects. For instance, the FBR's digitisation programme, including placement of the latest equipment at the bordering points, the government has spared Rs20 billion for utilising funds towards FBR's related development projects.
The PSDP funding of Rs1 trillion might not witness revision, but the release of funds might be slowed down in the first half (July-December) period to keep fiscal deficit and demonstrate the primary surplus within the envisaged target of 2.4% of GDP for the whole financial year.