Pakistan Economy_1HFY20 Fiscal numbers leave a lot to read between the lines, (AKD Daily, Feb 17, 2020)
Pakistan Economy: 1HFY20 Fiscal numbers leave a lot to read between the lines
- Official fiscal numbers for 1HFY20 are out. The fiscal deficit has narrowed to 2.3% of GDP (PKR994bn) vs. 2.7% of GDP (PKR1,029bn) in 1HF19, recording a primary surplus of PKR286bn (0.7% of GDP) well ahead of IMF’s revised surplus target of PKR87bn (0.2% of GDP)
- This improved fiscal equation was largely on account of exorbitant increase in non-tax revenues – which grew 3.1xYoY on the back of higher SBP profit and 4G license renewal fee, while indirect/direct tax collection climbed 17/20%YoY reflecting the impact of income tax rationalization and removal of tax exemptions
- While improvement in 1HFY20 has earned some positive carry, the gov’t will have a tough time in achieving overly ambitious fiscal targets in the upcoming quarters, as the support from non-tax revenue evaporates and tax revenue shortfall widens, while the IMF pushes for improved quality of adjustment to ensure sustainability of reforms
- We re-iterate our view of staggered buying at attractive levels, effectively building positions during times of drastic slides. Upcoming FATF plenary meeting, coupled with gov’t measures for meeting IMF criteria should dictate market expectations, where investors will be keenly observing the developing narrative surrounding any concessions to boost demand.
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