Sources said that the economic team of the government informed Prime Minister Syed Yousuf Raza Gilani that federal fiscal deficit stood at Rs 355 billion on December 12, however, the consolidated fiscal deficit, federal and provincial, has come down slightly to Rs 350 billion largely because of Rs 5 billion surplus deficit shown by the provinces.
As now the Pakistan Electric Power Company (Pepco) has asked for release of Rs 145 billion, the fiscal deficit would swell to Rs 500 billion. Sources said that Pepco was also seeking government's intervention for recovery of its outstanding, Rs 62 billion against provinces and Rs 60 billion against Karachi Electric Supply Company (KESC).
Sources said that during presentation to the Prime Minister by Ministry of Finance concerns were expressed by a donor over the prevailing economic situation and feared that slippage on fiscal side could tumble Pakistan to 2008 like situation that forced it to go for International Monetary Fund (IMF) stabilisation programme.
The Finance Ministry in its presentation on economic situation on Wednesday informed the Prime Minister about the bleak picture of the economy and major threats to it. They said that the fiscal side would remain a serious challenge for the economic managers and the country may not be able to achieve 4.7 percent fiscal deficit agreed with the International Monetary Fund (IMF), if nothing was done to prevent leakage in the power sector with immediate reforms, and failure to implement Reformed General Sales Tax (RGST). The failure to implement RGST would cause a revenue loss of Rs 40 billion, they added.
The meeting was informed that the situation would further worsen and the government would have no other option but to go for borrowing from the State Bank of Pakistan (SBP) if arrears of $750 million on account of Coalition Support Fund (CSF) were not disbursed before December 31 by the US. The borrowing from the central bank would have negative impact on inflation.
The economic team also brought into the notice of the Prime Minister the negative impact of delay in power sector reforms on the economy. The delay in passing on monthly 2 percent tariff to the consumers was accumulating around Rs 8 billion to Rs 9 billion monthly on the budget.
On the directives of Prime Minister, Ministry of Finance has convened a meeting of power sector today (Thursday) that would be attended by the official of Ministry of Water and Power, representative of Planning Commission and Pepco to discuss the issue of reforms and outstanding dues of Pepco.