ISLAMABAD - The government has revised upwards the fiscal deficit target to 7.5 percent of the GDP after reducing the tax collection target for ongoing fiscal year.
Ministry for Finance recently informed the parliament that the government would keep the budget deficit at 7.5 percent of the GDP (Rs3282.5 billion). Earlier, in budget for 2019-2020, the government had projected the budget deficit at 7.2 percent of the GDP (Rs3151.2 billion). The government has apparently upward revise the budget deficit target after downward revising the tax collection target to Rs5238 billion from budgetary target of Rs5550 billion.
The incumbent government is facing massive shortfall in tax collection during ongoing financial year. Tax collection shortfall had swelled to Rs384 billion in seven months’ period. The FBR has collected Rs2407 billion as compared to the actual target of Rs2791 billion and Rs2552 billion revised target. The FBR had faced massive shortfall of Rs104 billion in January only, as it collected Rs321 billion in January as against the target of Rs425 billion. Independent economist as well as International Monetary Fund (IMF) believed that Pakistan would not able to achieve the revised target of Rs5238 billion without additional revenue generation measures like mini budget.
However, the government had so far successfully controlled the budget deficit in current fiscal year mainly due to increase in non-tax revenues. Ministry for Finance has informed the National Assembly that fiscal consolidation in FY 2019-20 helped in contained the fiscal deficit to (Rs. 686 billion) 1.6 percent of GDP during first five months (July-November) of current fiscal year as compared (Rs. 951 billion) 2.5 percent of GDP during same period last year. Ministry also stated that primary balance posted surplus of Rs. 117 billion during July-November FY 2019-20 (0.3 percent of GDP) as compared deficit of Rs. 136 billion (-0.4 percent of GDP) during same period last year. The government had successfully controlled the budget deficit with the help of non-tax revenues.
Pakistan had so far failed to convince IMF for not presenting the mini budget to bridge the tax collection shortfall. Officials of ministry of finance and FBR have asked the IMF that mini budget would fuel the inflation rate, which is already on the higher side. Inflation was recorded at 14.6 percent in January 2020— scaling the highest level in 12 years. The government has presented the alternative plan to the visiting IMF delegation that would help in controlling the budget deficit in the current financial year.
Under the alternative plan, the government is hoping to generate handsome amount from the privatization of public sector entities by June 2020, which would count as non-tax revenue. The government had already upward revised the non-tax collection target by Rs400 billion to Rs1.6 trillion in the current fiscal year from budgeted Rs1.2 trillion. The government had already collected Rs406 billion in first quarter (July to September) of the year 2019-20, while an additional Rs338 billion would be collected from telecom sector, Rs200 billion from profit of State Bank of Pakistan (SBP), Rs300 billion from the privatization of two LNG based power plants, Rs120 billion from dividends and interest and Rs250 billion from petroleum development levy.
