LAHORE - With the fiscal indicators turning not-so-positive as the fiscal year unfolds, actual deficit could easily be higher clocking in at 6.3 per cent of the GDP, instead of remaining at 4.7 per cent as targeted by the government in federal budget 2012-13, financial experts said.

“Despite tax reforms promised in the last few budgets, the government could not fully implement them and, so far the tax revenue stands at a Rs 1,013 billion in 1HFY13, up 11.9 per cent YoY. The Federal Board of Revenue (FBR) had presented two tax amnesty schemes, bringing tax evaders into the tax net, legalizing the smuggled vehicles at nominal rates. The latter has been implemented through an SRO, while tax amnesty bill could not be presented in the outgoing National Assembly, thus, fading away hopes for higher collections this year,” observed analysts at AHL in a report. The FBR is chasing the revised target of Rs2,190 billion. Experts estimation for the tax revenue works out to be even lower at Rs2,166 billion, a marginal 5 per cent growth YoY (excluding 3G auction, Etisalat flows and tax amnesty estimates). This should take the overall revenue to Rs3,055 billion in FY13E; marking a 19 per cent YoY rise.

On the spending side, government budget outlays have already been superseded when it comes to current expenditure – subsidies in particular. Total expenditure is expected to outgrow the government’s target of Rs2,960 billion in FY13. Experts estimate that it would swell up to Rs4,520 billion by end of FY13, a 15 per cent YoY increase from last year’s Rs3,936 billion. The power subsidy alone has been exhausted and it is expected it would easily cross the Rs500 billion mark once again. On the developmental side, experts did see a higher spending with PSDP released-amount reaching Rs185 billion in 8MFY13). Bearing in mind that elections are around the corner, government spending is expected to go even higher.

They said that so far, IMF repayments and huge government borrowings have been the highlights of the FY13 keeping the external financing balance in negative and domestic financing bloating, respectively. However, by the end of FY13, experts see the external and domestic financing reaching Rs61 billion (net of repayments) and Rs1,423 billion, respectively. This financing is exclusive of any further IMF loan as they don’t see any loan agreement happening with IMF any sooner amid the political transition. Thus, with a bloated fiscal deficit over 6 per cent they expect continued pressure carrying over to the new political setup and the primary task to be handled to make a first step towards improving the root-cause of the overall economic issues.