Economic estimates for budget FY13 – Alfalah Securities Limited

Karachi: The Ministry of Finance has prepared Federal Budget FY13 document projecting a growth in GDP of 4.5%, inflation at 9.5% and fiscal deficit at 4.2 %.

According to Alfalah Securities Limited, The consolidated tax ratio is likely to be raised from 10.4% in FY12 to 12% in the next three years. The tax to- GDP ratio, estimated at 9.3% for the current year, is likely to be increased to 10.3% over the next three years. Similarly remittances are estimated to rise to USD13.1 billion in FY13 and the revenue target is projected at PkR 2.338 trilion (9.7 % of GDP) in FY13 against the current year’s estimates of PkR 1.952 trillion (9.3% of GDP). On the external side, the current account deficit has been estimated at USD 4.1 billion, exports at USD 26.7 billion and import at USD 42 billion during FY13. Federal government’s grants have been projected at PkR 50 billion, net domestic loans at PkR 874 billion and net external loans at PkR 91 billion for FY13.

Finance Ministry expects that real GDP growth will be 4.0 % in FY12 while headline inflation for June 2012 is likely to be 11.5% YoY. Large-Scale Manufacturing (LSM) is showing a sign of recovery during (July-January) 7M FY12 growth is 1.3% against negative 0.3% during the corresponding period last year. The current account deficit widened to USD 2.9 billion primarily because of high import bill and sluggish growth in exports. Workers’ remittances recorded a healthy growth of 23.4% rising to USD 8.6 bn. FBR collection continued to show vibrancy, exhibiting a growth of 25% YoY to PkR 1.27 trillion during 9M FY12. The prevailing economic situation poses serious threat to the prosperity and growth of the country as economic numbers are portraying a bleak picture of the economy. The policy makers are considering optimistic projections for FY13 which, however, would require stringent administrative measures to implement the policies to put the economy back on the track of prosperity.