ISLAMABAD-The government is expecting that budget deficit would improve after Federal Board of Revenue (FBR) has exceeded the tax collection target by Rs34 billion in the first quarter (July to September) of the current fiscal year.
“Budget deficit figure of the first quarter will be finalised in next couple of weeks,” said an official of the ministry of finance. However, he hoped that government would control the deficit after massive increase in tax collection in July to September period of the ongoing financial year. He said that government is following financial discipline that is helping in controlling the deficit.
The official has shared the figures of budget deficit of first two months. He informed that the budget deficit was recorded at Rs440 billion (0.9 percent of gross domestic product) in the first two months of FY21. He said that tax collection of FBR is showing healthy growth during current fiscal year.
The FBR had collected Rs1004 billion in first quarter (July to September) of the current fiscal year, exceeding the tax collection target by Rs34 billion. The FBR had reported a net revenue figure of Rs.1,004 billion, exceeding the given target of Rs. 970 billion by a margin of Rs34 billion. This is the first time FBR has managed to cross the figure of 1 trillion in gross as well as net collection in first quarter of a fiscal year. The gross revenue stood at Rs.1052 billion. Income Tax collection for the quarter stood at Rs. 358 billion. Similarly, collection of Sales Tax, Federal Excise Duty and Customs Duty remained at Rs. 426 billion, Rs. 56 billion and Rs. 164 billion respectively.
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. The Asian Development Bank (ADB) in its recent report had projected that Pakistan’s fiscal deficit is projected to decline to the equivalent of 7.0% of GDP in FY2021. Revenue is projected to increase, reflecting ambitious revenue-mobilization targets following initiatives to withdraw tax exemptions, rationalize tax concessions, and broaden the tax base. This forecast depends on COVID-19 risks subsiding and rapid economic recovery to pre-COVID norms.
Fiscal expenditure is projected to increase only slightly as the anticipated curtailment of some current expenditures such as subsidies somewhat compensates for higher development and social sector spending, which will continue to rise to support growth and economic recovery.
It is worth mentioning here that Pakistan’s fiscal deficit came in at 8.1 percent of GDP in 2019-20. The country’s total budget deficit recorded at Rs3.376 trillion in fiscal year ending June 30, 2020 or 8.1pc of GDP.