Fiscal sector continues to perform better as a result of government’s efforts to maintain fiscal discipline
ISLAMABAD - Pakistan’s budget deficit was recorded at Rs1.65 trillion during first nine months (July to March) of the current fiscal year.
The country’s expenditures stood at Rs6.64 trillion as against the revenues of Rs4.99 trillion, leaving budget deficit at Rs1.65 trillion or 3.6 percent of the GDP, according to the latest data of ministry of finance. Primary balance, which is the difference between government’s revenue and its non-interest expenditure, was recorded in surplus of Rs451.8 billion. The government has restricted the budget deficit at 3.6 per cent of the GDP during July-March period of FY2020-21 as against 3.8 percent of the GDP in corresponding period of the previous year.
“Despite higher mark-up payments and COVID-related expenditures, the fiscal sector continues to perform better as a result of the government’s efforts to maintain fiscal discipline,” the ministry of finance noted. An official of the ministry informed that government has restricted the deficit due to handsome increase in tax collection and control in expenditures, which resulted in surplus primary balance. He further said that a main challenge for the government is ongoing third wave of Covid-19, which might disturb the fiscal discipline in the months to come.
Pakistan’s overall expenditures were recorded at Rs6.64 trillion in first nine months of the ongoing fiscal year. Interest payment has once again increased massively, as it cost Rs2.1 trillion in nine months. The government has paid interest worth of Rs1.93 trillion on domestic loans and Rs169.87 billion on foreign loans. In 2020-21, the government would pay Rs2.95 trillion as interest payment. Meanwhile, defence spending has remained at Rs784 billion, which is 60 percent of the overall annual defence budget, Rs1289 billion. The spending on development expenditures including federal as well as provincial remained at Rs668 billion in July to March period of the year 2020-21. In expenditures, the government has paid Rs329.03 billion as pension payment, Rs311.9 billion on running of civil government expenditures, Rs204.3 billion as subsidy and Rs424.3 billion as grants to others.
Of the total revenues of Rs4.99 trillion, the government collected around Rs1.23 trillion as non-tax revenues during the first three quarters of the FY2021. In non-tax revenues, the government had collected Rs53.2 billion as mark-up on public sector entities, Rs19.6 billion as dividend, Rs497.5 billion as surplus profit of the State Bank of Pakistan, Rs20 billion as profit of Pakistan Telecommunication Authority (PTA), Rs10.5 billion as defence, Rs10.2 billion as passport fee and Rs7.1 billion as discount remained on crude oil, Rs53.3 billion as royalties on gas and oil, Rs1.396 billion as windfall levy against crude oil and Rs68.3 billion through other sources.
Tax collection has helped the government in controlling the budget deficit. Federal Board of Revenue (FBR) had collected Rs3394 billion in first three quarters (July to March) of the current fiscal year, exceeding the tax collection target by more than Rs100 billion. The income tax collection during the July-March period stood at Rs1.25 trillion as against the target of Rs1.29 trillion. The income tax collection, however, showed growth of 6 percent when compared with Rs1.18 billion collected during the same period last year. Meanwhile, the sales tax collection jumped to Rs1.415 trillion in the nine months of FY21. Federal excise duty (FED) collections were up 4 percent to Rs191.6 billion as against Rs188 billion last year. The FED target for July-March was set at Rs221b, which was missed. Moreover, Customs collection stood at Rs541 billion during the July-March period this year as against Rs492 billion over the last year. The target projected under Customs was Rs448 billion for the period under review.
The four provincial governments recorded budget surplus of Rs412.7 billion during July to March period of FY2021, as their expenditures remained at Rs2.171 trillion as compared to the revenues of Rs2.584 billion. The government had budgeted provinces to give budget surplus of Rs242 billion during current fiscal year. In annual budget 2020-21, the government had set fiscal deficit target at 7.1 percent of the GDP (Rs3437 billion) for the ongoing fiscal year.