Fiscal Deficit Remains Elevated

Pakistani government expenditure continued to outstrip revenue is the first six months of FY2010 (July-June). Expenditure between July and December came in at PKR1313.2bn as compared to revenue of PKR909.9bn, resulting in a PKR403.3bn deficit (up from PKR217.5bn in the same period of FY2009). Interest payments and defence spending remained significant outlays at PKR294.1bn and PKR166.0bn respectively, a situation we view as far from ideal given that by comparison development expenditure came in at only PKR239.4bn. We expect Pakistan's government to maintain its overspend, and forecast a FY2010 fiscal deficit equivalent to 5.1% of GDP.

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