Pakistan's budget deficit for the fiscal year 2009/10 (July-June) swelled to 6.3 percent of GDP, wider than the targeted shortfall agreed with the IMF of 5.1 percent, Finance Ministry figures showed on Tuesday. The deficit in fiscal 2008/09 was 5.2 percent. “This will keep pressure on the central bank to keep a tight monetary policy and it is also not good for sovereign ratings,” said Asif Qureshi, director at Invisor Securities. The government had planned to reduce the deficit to 4 percent in 2010/11, but analysts expect the shortfall to be bigger because of the cost of relief and rebuilding related to the massive flooding in the country. “The fiscal deficit will widen considerably to nearly double the programmed amount on account of higher spending and cyclically lower revenue collection,” said Moody's Investor Service. Pakistan is fighting a Taliban insurgency in the northwest that, coupled with political uncertainty, economic difficulties and chronic power shortages, has put the economy under stress. Pakistani and International Monetary Fund (IMF) officials are meeting in Washington to review the approval of the sixth tranche of an $11 billion loan and to try and work out the impact to the economy from the floods. They said they would review all options. On the brink of default, Pakistan turned to the IMF in November 2008 for the loan to help put the economy back on track. It received a fifth tranche of $1.13 billion in May.
