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01-Feb2019

Fitch Ratings warns of fiscal slippage if govt goes for populist interim budget

Fitch Ratings has warned of a second consecutive year of fiscal slippage if government goes for populist interim budget 2019. The interim budget to be presented on February 01 could give some indication of the government's commitment to fiscal consolidation, which is one of the main sensitivities in the sovereign ratings. Fitch stated that populist spending will aggravate fiscal pressures, which are already building on account of revenue shortfalls.

It further mentioned that higher pre-election spending could risk a second consecutive year of fiscal slippage relative to the government's targets and would further delay plans to reduce the high general government fiscal deficit and debt burden. It added that longer-term trends are more important to the sovereign rating profile.

Besides, it believes the central government may still be able to meet its fiscal deficit target of 3.3 per cent of GDP for FY19, which will help support its fiscal credibility, although this may be achieved by deferring capital expenditure and postponing bill payments until after March.


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