The current year 2017-18 is the last year of the stipulated constitutional five years tenure of the present federal government. It is good to note that it is off to a good start for economic performance and has ended the first quarter July to September 2017 on a positive note, due to the determined efforts of its economic team.
It is appreciable that within less than a fortnight of the end of the first quarter of this ongoing financial year, the federal government has made public the information about targets and achievements regarding economic growth in order to keep people updated in this regard. On the basis of provisional figures available from official sources regarding fiscal operations, it can safely be stated that the federal government has closed the first quarter on a strong fiscal performance note.
The overall budget deficit during the first quarter is reported to be Rs.324 billion, which is favourable compared with Rs.438 billion during the same period last fiscal recording , with an appreciable decrease of 26 per cent . The government has managed to bring the budget deficit down to 0.9 per cent of Gross Domestic Product (GDP) during July to September 2017 quarter from 1.3 per cent in the same period of 2016-17. This was made possible through robust tax collections by revenue generation agencies and lower expenditure
Reduced fiscal deficit means lower public debt accumulation; which supports alignment to the targets in the recently amended Fiscal Responsibility and Debt Limitation Act.
However, it should also be mentioned here that if the provinces had not generated between themselves surplus of Rs 70 billion during the period under review, the budget deficit might have hiked to 1.1 per cent of GDP in the quarter. The provinces had thus helped the federal government to reduce the budget deficit by 0.2 per cent of GDP.
Federal Board of Revenue (FBR) is the main revenue collection and generation of the federal government. Its good performance brings smiles on the faces of those treading the corridors of power and sends notes of concern and disappointment when it fails to achieve the set targets.
According to the provisional data available, the tax collections by the FBR remained robust during the period under review. Total tax collections of as much as Rs.765 billion has commendably demonstrated growth of more than 20 per cent as compared to the collection figures of Rs.625 billion in the same period of the last financial year.
Due to higher tax collections, the amounts transferred to the provinces out of the divisible pool of taxes and duties collected by the federal government also increase substantially. As compared to last year’s first quarter transfers of Rs.416 billion, this year, the total transfers to the provinces have already reached the level of Rs.570 billion, as much as Rs.154 billion more.
On the expenditures side, the federal government maintained strict fiscal discipline which produced good results. As against total expenditure of Rs.914 billion during the first quarter of 2016-17, the federal government spent Rs.894 billion in the first quarter of the current financial year despite the fact that increased investments were made through the development budget. Debt servicing consumed Rs.394 billion and remained the largest consuming head on the expenditure side, followed by defence spending of Rs.177 billion.
The utilization of development funding on account of financing of the Public Sector Development Programme (PSDP) stood at Rs.84 billion, indicating accelerated developmental activities in the first quarter, with utilization of Rs.20 billion more as compared to last year’s first quarter spending figures of Rs.64 billion.
Despite this overall good performance during the period under review, some economic experts believe that rigidities on both revenue generation and expenditure sides may continue to haunt the economic team members of the federal government, making it somewhat tough to achieve the desirable budget deficit target of 4.1 percent of GDP envisaged for the entire financial year 2017-18.
While appreciating inflation containment, lower interest rates, positive and strong growth in large scale manufacturing, recent upward trend in exports as well as remittances back home of Pakistani expatriates, it is hoped and expected that the same growth tempo will also be maintained during the remaining three quarters to successfully achieve the targets fixed for entire financial 2017-18. Maintaining focus on acceleration of economic growth will ensure continued gradual reduction in unemployment and poverty; areas to which the federal government is committed.
The federal government through its team of economic managers has managed to close the first quarter of financial year 2017-18 with a positive strong fiscal performance and this appreciable tempo must be maintained to achieve still better results on the economic growth front against all odds.
With inflation containment, lower interest rates, positive and strong growth in large scale manufacturing, the first quarter of this financial year has been strong. It remains to be seen if the appreciable tempo can be maintained for the rest of the year.