ISLAMABAD - The incumbent government is considering slashing public sector development programme (PSDP) after facing tax collection shortfall worth of Rs 80 billion during seven months (July-January) of the ongoing financial year 2013-14, it has learnt.

Pakistan Muslim League Nawaz (PML-N) government, which imposed new taxes worth of over Rs 200 billion in budget, is struggling to achieve the annual tax collection target, as shortfall has gone beyond Rs 80 billion. “The government may cut the developmental budget due to shortfall in revenue collection”, said an official of finance ministry. He added that government could not impose new taxes due to pressure of political parities as well as of public to reach the annual revenue target of Rs 2475 billion. Sources informed that government would have to take the aforesaid decision in order to keep budget deficit at 5.8 percent (around Rs 1500 billion) during current fiscal year. The government made commitment with the IMF to reduce the fiscal deficit at 5.8 percent of GDP, close to Rs1,500 billion, for the current fiscal year. Federal Board of Revenue has faced tax collection shortfall of Rs 80 billion in July-January 2013-14 period, as it collected Rs 1201 billion against the target of Rs 1282 billion.

Federal Minister for Planning and Development Ahsan Iqbal had already made it clear that the Rs540 billion development spending hinges on the FBR’s ability to raise Rs2.475 trillion in taxes. Similarly, in order to offset the impact of low collection on the budget deficit, the IMF has also shown current year’s development budget at Rs430 billion as against Parliament’s approved budget of Rs540 billion.

The government has released Rs 179.36 billion for the public sector development programme during seven months (July-January) of the ongoing financial year 2013-14, which is 42.2 percent of the allocation to be made by the ministry of planning and development.  The PML-N government has set aside Rs 540 billion for meeting the development needs of the country and out of that Rs 425 billion are at the disposal of the Ministry of Planning and Development. An amount of Rs115 billion has been earmarked for new initiatives by the government. The break-up of federal PSDP worth of Rs540 billion revealed that Rs115 billion have been kept for new development initiatives, Rs110 billion would come from foreign aid and Rs315 billion would be released by Planning Commission of Pakistan.

Sources informed that government wants to restrict the budget deficit at 5.8 percent (Rs 1500 billion) by the end of current fiscal year. The government has successfully controlled the deficit at 2.2 percent of the GDP during first half (July-December) of the current fiscal year, which was 2.5 percent of the GDP during corresponding period of the previous year.