Medium-term Economic Framework: While the FY14 Budget acknowledges - TopicsExpress



          

Medium-term Economic Framework: While the FY14 Budget acknowledges that this coming fiscal year will remain a year of consolidation ahead of stability, projections for the next few years are more optimistic. In this regard, the GoP is targeting GDP growth of 5.5% in FY15 and 7.0% in FY16. In our view, while FY14 GDP growth should clock in above the 4% mark, consistent improvement up to the 7.0% growth mark will likely need resolution to the energy deficit coupled with an uptick in private sector credit offtake. At the same time, the GoP is aiming to restrict inflation to 8% across the next 3yrs which appears relatively more achievable provided natural calamities are averted, international oil prices remain stable and there is no speculative run on the PkR. Considerably more challenging, in our view, is the aim to raise the Tax-to-GDP ratio to 15% across the next 5yrs where this may require agriculture tax/wealth tax in addition to a comprehensive widening of the tax net. In sum, while the FY14 Budget focuses on the right areas and provides a policy guideline for the next 5yrs, the road ahead remains challenging where we reiterate that an IMF program appears likely in the next 3-6 months.
Posted on: Thu, 13 Jun 2013 08:27:02 +0000

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