Pakistan's budget deficit widens to 8.9% of GDP in 2018/19

A trader counts Pakistani rupee notes at a currency exchange booth in Peshawar, Pakistan December 3, 2018. REUTERS/Fayaz Aziz/Files

ISLAMABAD (Reuters) - Pakistan’s budget deficit widened to 8.9% of gross domestic product in the financial year that ended in June, according to data on Tuesday that underlines the severe economic crisis facing the country.

The deficit size compared with a 7.1% estimate Prime Minister Imran Khan’s government gave in June and with 6.6% during the year that ended in June 2018.

Pakistan, which in July sealed a $6 billion loan agreement with the International Monetary Fund, has been struggling to avert a balance of payments crisis and to prevent its debt from spiralling out of control.

The full-year’s deficit figure was released on the finance ministry website. Revenue during the year ended June 30 equalled 12.7% of GDP, a fall from the previous financial year’s 15.2%.

The figures showed government expenditure at 21.6% of GDP in the latest financial year, compared with 21.8% a year earlier.

Pakistan has a notoriously narrow tax base, with fewer than 1% of its 208 million people filing income tax returns. There is a vast informal economy and several key sectors of the official economy are largely exempt from tax.

The budget for 2019-20, passed in June, approved measures designed to cut the deficit by bringing in o government coffers the equivalent of 1.7% of GDP. Pakistan has promised a multiyear effort to overhaul its tax and budget system to put its weak public finances on a firmer footing.

Reporting by James Mackenzie; Editing by Richard Borsuk