This target will be as consistent with the overall macroeconomic framework supported under the Poverty Reduction Strategy Credit (PRSC) programme," the official quoted government's economic managers as conveying to the bank's team, which recently concluded talks on the status of PRSC II.
The bank's team, the official said, was informed that due to continued good performance of the industrial sector, a bumper cotton crop and prospects for a good wheat crop, economic growth during the current fiscal was expected to remain strong, ranging between 6.6 percent to 7.2 percent of the GDP.
The government has also informed the financial institutions that due to strong GDP growth during the next fiscal, the government would make considerable expansion in overall public expenditures and the transfer of increased share of fiscal space to provinces through mechanism of the National Finance Commission (NFC).
The bank, while commenting on the prevalent macroeconomic situation, said that significant shortfall in Petroleum Development Levy (PDL) estimated about Rs 33 billion to Rs 34 billion during the current fiscal and to a lesser extent the shortfall in Gas Development Surcharge (GDS) revenues appear to have been compensated by increased revenue performance by the Central Board of Revenue (CBR).
While this improved CBR performance may help in addressing the PDL shortfall, the untargeted PDL and gas subsidies do no appear to be in the spirit of the government's Poverty Reduction Strategy as they were likely to benefit relatively wealthy segments of the society, nor consistent with its expenditure framework, which forecast a reduction in untargeted subsidies, the bank's team added.
Though the government has projected 7 percent to 8.2 percent (year-on-year) inflation, the bank's team underlined the importance of tightening of monetary policy and signalling to markets that the State Bank of Pakistan (SBP) was vigilant of the impact of monetary policy on the health of the rapidly expanding banking sector and on inflation, which tends to be highly regressive tax.
The bank, however, was of the view that the mission was unable to carry out detailed analysis of the budget outcomes so far or the outlook for the remaining fiscal due to lack of data availability.