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Mini-budget supports exports, but increases fiscal consolidation challenges: Moody’s

It projected the deficit to widen to 6% of GDP in fiscal 2019 due to revenue growth possibly being below government forecasts, slower economic growth and the new revenue-based incentives.

LAHORE: Moody’s in a report released on Thursday said the recently announced mini-budget supports exports but will increase fiscal consolidation challenges for the government.

According to the rating agency, there is a greater risk of fiscal slippage and slower fiscal consolidation in the dearth of further revenue-raising measures.

It noted that the mini-budget announced on 23rd January greatly concentrates on revenue-based measures to improve supply-side conditions for businesses and incentivize domestic reinvestment.

Also, if successful, the measures will assist the country’s manufacturing sector, promoting exports and import substitution and help narrow the current account deficit.

Due to the dearth of new spending cuts or revenue-raising measures, Moody’s said these measures will keep Pakistan’s budget deficits wider for longer, likely undermining the credibility of government efforts to achieve fiscal consolidation.

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