The broad money expanded at a rate of 12.46 per cent in FY10 against 9.56 per cent in FY09. The SBP said the total investment as a percentage of GDP had declined for three consecutive years, falling to 16.6 per cent in FY10. However, it said that national saving had improved because of an increase in workers’ remittances by a 0.5 percentage point to 13.8 per cent of GDP in FY10.

The debt, the sources said, stood at around Rs115 billion, of which about Rs100 billion pertained to the provincial governments. If this amount was cleared, the requirement for tariff increase would come down to about 24 per cent. The official said that provincial governments had given an undertaking to the prime minister that they would curtail their non-salary expenditures this year “in the interest of national cause” in order to provide a saving of about Rs166 billion as envisaged under the federal budget. However, the federal government would also have to reduce its current expenditure, including security-related spending, and find some other avenues for savings.

Inflation averaged 11.7 percent in the 2009/10 fiscal year ending in June, 2.7 percentage points higher than the central bank's target and Anwar said current trends and expected developments indicated that inflation risk would continue through the 2010/11 fiscal year. This is due to a rise in electricity prices, an increase in the general sales tax and a revision in government employees’ wages. Anwar said Pakistan missed its fiscal deficit target of 5.1 per cent for 2009/10 and it could be higher than six per cent. Under an IMF programme agreed in November 2008 for a two-year emergency package totalling $10.66 billion, Pakistan's government also agreed to zero net borrowing from the state bank. According to official data, the government overshot that target by 41.93 billion rupees ($490 million) in 2009/10, a cause for concern among economists and analysts. “Clearly, such developments are inconsistent with the objectives of macroeconomic stability,” Anwar said, adding that a deficit target of 4 percent of GDP for the 2010/11 fiscal year already seems challenging. The deficit could exceed 5.0 percent of GDP, he said. The central bank also stressed the need to “urgently” increase the tax-to GDP ratio and boost revenue for sustainable economic growth.

The crux of the finance ministry’s presentation was that the new NFC had created a big problem and robbed the provinces of incentives for additional revenue mobilisation. “When they get additional resources from the centre without any effort, they need not take unpopular decisions in their own constituencies to raise new taxes,” a federal government official said, adding that the provinces had not fulfilled commitments made under the NFC award to impose taxes on real estate and agriculture. The provinces have also been reminded that transfer of additional resources to them under the NFC award is linked to the transfer of responsibilities under the 18th Amendment. Therefore, they would have to foot the bill for federal public sector development programmes at the provincial level or even at the district level.

Upward revision in the prices of electricity, gas and POL products has already affected the business and industry. Maqbool said the government should promote a business friendly environment by reducing utility tariffs and interest rate.