Pakistan’s newly presented mini-budget was regarded as “positive” for the manufacturing and export-oriented sectors. Pakistan’s new budget is expected to intensify the country’s foreign income and control the current account deficit, said U.S. rating agency Moody.
The agency also said that the new budgetary measures undermined the government’s income generation side as tax incentives given to industries and the agriculture sector further toughened the challenge of achieving the tax revenue collection target, and the budget deficit is feared to remain high.
“While the mini-budget will bolster the export sector, there is a greater risk of fiscal slippage and slower fiscal consolidation in the absence of additional revenue-raising measures,” the rating agency added.
Last year in June, the agency lowered Pakistan’s credit rating to “B3 negative” from stable after it found that the country’s foreign currency reserves were inadequate to pay back foreign debt.
The latest analysis suggested that foreign currency reserves were tended to improve, which might lead the credit rating body to consider revising upwards the country’s credit rating going forward.
The Moody’s analysts said that if the new measures were effective, they will help improve Pakistan’s manufacturing sector, fostering export and import substitution, and help narrow the current account deficit. In the absence of new spending cuts or revenue-raising measures, the steps may not be sufficient to cut the country’s budget deficit.
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