Reuters reported that Pakistan's fiscal deficit for the first six months of the fiscal year 2011-12 (July 2010 to June 2011) was 2.6% of gross domestic product. This compared with a deficit of 2.9% of GDP in the same period the previous year.

A finance ministry official said that "The full year fiscal deficit target has also been revised upwards to 4.7%, from the earlier estimate of 4%."

The fiscal deficit widened to 6.6% of GDP in the 2010-11 fiscal year.

Mr Asif Qureshi director at Optimus Capital Management Limited said that "Containing fiscal deficit to 4.7% in this fiscal year looks like an extremely difficult task, especially as it is election year. International oil prices are also rising which means energy subsidies will increase, therefore increasing the government's expenditure."

Subsidies and slow implementation of reforms as demanded by the International Monetary Fund have been one of the main reasons for a high fiscal deficit.

In 2008, Pakistan and the IMF agreed on a three year package loan for USD 11 billion. But the program was halted in 2010 because of slow implementation of fiscal reforms and only USD 8 billion has been disbursed so far.

Islamabad opted not to seek a new IMF program or an extension. It has to start repaying the loan in early 2012 and that is when the pressure on foreign exchange reserves will increase.

The Finance Ministry official said that "The probability is that we will not be going to the Fund right now and are in fact expecting a few inflows."

According to data from the State Bank of Pakistan, the current account recorded a provisional deficit of USD 2.154 billion in the first six months of the 2011-12 fiscal year as compared with a surplus of USD 8 million in the same period of 2012.

(Sourced from www.reurters.com)