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Pakistan's budget deficit widens to 8.9% of GDP in 2018/19

A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, Pakistan Photograph:( Reuters )

Reuters Islamabad, Pakistan Aug 27, 2019, 02.01 PM (IST)

Pakistan's budget deficit widened to 8.9% of gross domestic product in the financial year that ended in June, according to data on Tuesday that underlines the severe economic crisis facing the country.

The deficit size compared with a 7.1% estimate Prime Minister Imran Khan's government gave in June and with 6.6% during the year that ended in June 2018.

Pakistan, which in July sealed a $6 billion loan agreement with the International Monetary Fund, has been struggling to avert a balance of payments crisis and to prevent its debt from spiralling out of control.

The full year's deficit figure was released on the finance ministry website. Revenue during the year ended June 30 equalled 12.7% of GDP, a fall from the previous financial year's 15.2%.

The figures showed government expenditure at 21.6% of GDP in the latest financial year, compared with 21.8% a year earlier.

Pakistan has a notoriously narrow tax base, with fewer than 1% of its 208 million people filing income tax returns. There is a vast informal economy and several key sectors of the official economy are largely exempt from tax.

The budget for 2019-20, passed in June, approved measures designed to cut the deficit by bringing in o government coffers the equivalent of 1.7% of GDP. Pakistan has promised a multiyear effort to overhaul its tax and budget system to put its weak public finances on a firmer footing.