The global ratings agency Fitch on Wednesday said that the federal budget for fiscal year (FY) 2025 “strengthens prospects for an IMF deal”. The government presented the budget for the next year on June 12, which contained an ambitious tax revenue target of Rs13 trillion rupees ($47 billion) for the year starting July 1, a near-40 per cent jump from the current year, and a sharp drop in its fiscal deficit to 5.9pc of GDP from 7.4pc for the current year. Fitch, in a comment, said it forecasted “the fiscal deficit will narrow” assuming partial implementation of the budget — whether fiscal targets will be met entirely remained uncertain. “This should reduce external pressures, albeit at a cost to growth,” it added. The US-based agency recounted that the budget draft projected budget deficit of of 5.9 per cent of the GDP — from the previous year’s estimated 7.4pc — and 2pc primary surplus “on wide-ranging tax increases and also significant fiscal efforts at the provincial level”. Additionally, a separate report by rating agency Moody’s said that the government has projected real GDP growth at 3.6pc and headline inflation at 12pc. It also sought to increase federal government revenue to an ambitious Rs17.8trillion — 46pc higher than previous year’s. Overall, the budget also seeks to boost development expenditure of the centre and provinces by over 58pc to nearly Rs3.8tr. According to Fitch, “Our updated fiscal forecasts assume partial implementation and project a primary surplus of 0.8pc, on shortfalls in revenue generation and an overshoot in current spending, partly offset by under-execution in development spending.
