ISLAMABAD - Pakistan’s budget deficit was recorded at highest ever level of Rs2.26 trillion during last fiscal year (FY2018) due to lesser revenue collection against the soaring interest payment of the country.
The overall budget deficit, the gap between income and expenditure, widened to 6.6 percent of gross domestic product (GDP) or Rs2.26 trillion in 2017-18. The government had fixed the budget deficit target at 4.1 percent of the GDP (Rs1.375 trillion) for FY2018. Budget deficit had gone beyond the estimates of two former finance ministers—Dr Miftah Ismail and Dr Shamshad Akhtar—who projected the deficit at around 6 percent of the GDP.
The country’s expenditures were recorded at Rs7.49 trillion (21.8 percent of the GDP) as compared to revenues of Rs5.23 trillion (15.2 percent of the GDP), taking the deficit to Rs2.26 trillion (6.6 percent of the GDP), according to the latest documents of the Ministry of Finance. Key reasons for the increasing budget deficit were massive spending on interest and defence payments, huge shortfall in tax collection and provinces inability to give surplus budgets. The United States’ decision to withhold Coalition Support Fund disbursements also adversely affected Pakistan’s fiscal operations.
The government had spent Rs1.6 trillion on paying domestic and foreign debt servicing. The government had allocated Rs1.3 trillion for interest payment. However, the amount had surged by Rs300 billion due to the sharp rupee depreciation. Dollar value had touched historic level of Rs130 last month, which later came down to Rs123 as against Rs105 when the interest payment was earmarked at Rs1.3 trillion.
Meanwhile, a whopping Rs1.03 trillion was spent on defence budget. The defence spending was much higher than the revised estimates of Rs1 trillion. Initially, the government had allocated Rs920.2 billion for the defence for the last fiscal year. However, at the end of fiscal year, the budget spending had increased by Rs110 billion than the initial projections.
Meanwhile, the government had spent Rs576 billion on federal developments projects in the previous financial year. Meanwhile, the provincial governments had spent Rs880 billion on the development projects. The documents showed that the government spent Rs333.7 billion on pension payments, Rs124.7 billion on public order and safety affairs, Rs98.2 billion on education, Rs16.6 billion on health and Rs12.6 billion on recreation, culture and religion.
Of the total revenues of Rs5228 billion, the government collected around Rs760.8 billion as non-tax revenues during the last fiscal year. In non-tax revenues, the government had collected Rs87.8 billion as mark-up on public sector entities, Rs57.5 billion as dividend, Rs233.2 billion as profit of State Bank of Pakistan, Rs12.8 billion as defence, Rs16 billion as passport fee and Rs9.1 billion as discount remained on crude oil, Rs58.2 billion as royalties on gas and oil, Rs3.9 billion as windfall levy against crude oil and Rs264.5 billion through other sources.
The Federal Board of Revenue (FBR) had faced a massive tax collection shortfall of Rs171 billion during the year 2017-18. The FBR had initially targeted a total collection of Rs4,103 billion for the last fiscal year. Later, the target was revised downwards to Rs3935 billion. However, the FBR had collected Rs3842 billion at the end of previous fiscal year, leaving shortfall at Rs171 billion.
The four provincial governments recorded budget deficit of Rs22.37 billion during FY2018, as their expenditures remained at Rs2960.9 billion as compared to the revenues of Rs2938.5 billion. The government had budgeted provinces to give budget surplus of Rs347 billion during last fiscal year.