Pakistan to Bring Down Financial Deficit to 3%; Debt-to-GDP Ratio to 20%
By Sheeraz Aslam 'Pakistan Times' Staff Correspondent

ISLAMABAD: The Government will curtail the financial deficit to less than 3 % over the next seven-eight years and will also bring down the debt-to-GDP ratio to nearly 20 % over the next 5-7 years.

This was stated Wednesday by Dr. Salman Shah, Advisor to the Prime Minister on Finance, Dr. Salman Shah, while delivering his keynote address at a pre-budget seminar "budget 2007-08--a milestone in continuation of Economic Reforms".

"The endeavors to curtail financial deficit and debt-to-GDP ratio are aimed at saving more funds for the public welfare sectors of health and eduction", Dr. Salman said to a question about public debts.

He disclosed that the government had managed to drastically decrease the "debt-to-GDP" ratio from 100 % in 1998-99 to the currently 52 %, adding that the same ratio next year should be 49%.

"We are bringing down this ratio by 5 % annually at the average and will slash it to nearly 20 % in the next five-seven years", The Advisor said, further disclosing that the ultimate target was to achieve one of the top ratings like BBB etc.".

"We are already in the B-1 or B-plus grading and when we achieve the rating like BBB, it will mean that our economy has attained Investment Grade Quality which will open up doors of all kinds of investments for us".

He said the 100 % "debt-to-GDP" ratio eight years ago was indicative of the fact that the then government had borrowed almost to the value of the GDP.

Dr. Salman said the financial deficit currently stood at 4.2 % from the nearly 7 % in the late 90s. "It is a great leap forward for us", he said.

He said due to spending on earthquake rehabilitation, the financial deficit would remain at 3.5 % over the next three years but after that the target would be to bring it down to less than 3 %.

Giving an example, he said that Defence Saving Certificates issued at a rate

of 18.1 percent in 1996-97 would now be valued at Rs. 250 billion.

"It means that we have to give away Rs. 200 billion in addition to the Rs. 50 billion of principal amount", Dr. Salman said, emphasising that some other instrument could have been issued.

"We could have spent this amount of Rs. 200 billion on public sectors like health and education", he said.●