IMF warns Pakistan's budget deficit may hit record high due to coronavirus crisis

The International Monetary Fund has warned that the cash-strapped Pakistan's budget deficit is expected to rise to the record level to 9.2 per cent of the size of national economy or Rs 4 trillion (USD 23.7 billion) in current fiscal year due to the impact of the coronavirus pandemic.

In the Middle East and Central Asia Regional Economic Outlook (REO) Update released on Wednesday, the global lender urged the Pakistan government to ramp up spending on the health sector that remained the lowest in the region.

Fiscal expansion is expected in all countries as the fight against the virus and its economic effects is scaled up, the Express Tribune newspaper reported, citing the report.

It said that Pakistan's budget deficit that in pre-COVID-19 situation had been projected at 7.3 per cent of gross domestic product (GDP), may increase to 9.2 per cent. In absolute terms, the deficit will be equal to Rs 4 trillion, higher by Rs 800 billion than previous estimates, it added.

Inflation is projected to remain at 11.1 per cent this year and 8 per cent next year.

The deficit is expected to rise because of revenue shocks as the government has not yet announced any major increase in budgetary expenditure, according to finance ministry sources.

For fiscal year 2020-21, the IMF has projected 6.5 per cent budget deficit, higher by 1 per cent compared with the pre-COVID-19 analysis of the IMF staff.