Abdul Wajid Khan

The government is working to bring down fiscal deficit to 4.9% of the gross domestic product (GDP) in the current financial year, reports WelathPK. The Ministry of Finance stated in his latest monthly economic outlook report that to achieve the set economic targets, the government is focusing on stabilizing the economic growth, increasing revenue, enhancing exports, and protecting the vulnerable segments of society through relief measures and pro-poor initiatives.

It said that the fiscal sector remained under tremendous pressure in FY2022 due to additional expenditures related to the procurement of the COVID-19 vaccine, IPPs (independent power producers) circular debt payment, and social sector spending. Higher international oil and commodity prices as a result of the Russia-Ukraine conflict exacerbated the situation further.

The report said that in the backdrop of these challenges, the expansionary fiscal policy stance in FY22 reversed the consolidation gains achieved in the preceding two years. Consequently, the fiscal deficit surpassed the revised target of 7.1% of GDP and stood at 7.9% in FY22.

However, in FY23, the fiscal deficit is expected to come down to 4.9% of GDP, while the primary balance is likely to be in surplus of Rs153 billion. To achieve the set targets, the fiscal budget FY2022-23 is focused on stabilizing the economic growth, increasing revenue, enhancing exports, and protecting the vulnerable segments of society through relief measures and pro-poor initiatives.

According to the report on the federal and provincial fiscal operations for financial year (2021-22), total revenue was recorded at Rs8.035 trillion in financial year (2021-22). The total tax revenue during this period remained at Rs6.755 trillion, which included federal tax revenue of Rs6.142 trillion, and provincial tax revenue of Rs612 billion. The total non-tax revenue was recorded at Rs1.28 trillion, which included federal non-tax revenue of Rs1.151 trillion and provincial non-tax revenue of Rs128 billion.

The report highlighted that the total expenditures were recorded at Rs13.29 trillion. The total current expenditure during this period stood at Rs11.521 trillion, of which mark-up payments were Rs3.182 trillion and defence expenditures stood at Rs1.411 trillion. The development expenditure and net lending was recorded at Rs1.657 trillion and the statistical discrepancy was calculated at Rs116 billion. The budget deficit was recorded at Rs5.259 trillion, and the primary deficit stood at Rs2.077 trillion.

Total financing was recorded at Rs5.259 trillion, which included net external financing of Rs1.178 trillion and net domestic financing of Rs4.081 trillion. In terms of percentage of GDP, total revenue remained at 12% of GDP. Tax revenue stood at 10.1% of GDP, while non-tax revenue remained at 1.9% of GDP.

Total expenditure stood at 19.9% of GDP, the budget deficit was recorded at 7.9% of GDP, and primary deficit was calculated at 3.1% of GDP. The total GDP was calculated at Rs66.950 trillion. As for as provincial governments’ fiscal operations for financial year 2021-22 is concerned, the report added, the total provincial revenue was recorded at Rs4.687 trillion. The transfers from federal government for provinces under the National Finance Commission (NFC) Award stood at Rs3.589 trillion.

The provincial tax revenue was recorded at Rs612 billion, while provincial non-tax revenue stood at Rs128 billion. Federal loans and grants for provinces were recorded at Rs357 billion. The total provincial expenditure was calculated at Rs4.336 trillion. The current expenditure of the provinces remained at Rs3.2 trillion and provincial Public Sector Development Program (PSDP) stood at Rs1.216 trillion. The overall balance of the provinces remained at Rs351 billion.

The total revenue of Punjab province stood at Rs2.173 trillion. Transfers from the federal government under the NFC Award for Punjab stood at Rs1.785 trillion. Provincial tax revenue stood at Rs273 billion, and provincial non-tax remained at Rs63 billion. Federal loans and grants were recorded at Rs52 billion. The total expenditure of Punjab was noted at Rs1.822 trillion, which included current expenditures of Rs1.38 trillion, and PSDP of Rs613 billion.

The provincial revenue of Sindh was recorded at Rs1.246 trillion. Transfers from the federal government under the NFC Award stood at Rs902 billion. Provincial tax revenue stood at Rs268 billion, while provincial non-tax revenue was recorded at Rs14 billion. Federal loans and grants were Rs61.398 billion. The total expenditure of the province stood at Rs1.197 trillion, which included current expenditure of Rs947 billion and development expenditure of Rs224 billion.

Total revenue of Khyber Pakhtunkhwa province in financial year 2021-22 was recorded at Rs892 billion. The transfers from the federal government under the NFC Award stood at Rs595 billion. The provincial tax revenue was recorded at Rs42 billion, while provincial non-tax stood at Rs40 billion. Federal loans and grants remained at Rs214 billion. Total expenditure remained at Rs941 billion, including current expenditure of Rs 611 billion and development expenditure of Rs260 billion.

Total revenue of Balochistan stood at Rs374 billion. Transfers from the federal government under the NFC Award stood at Rs305 billion. The provincial tax stood at Rs28 billion, while provincial non-tax remained at Rs10 billion. Federal loans and grants were recorded at Rs30 billion. Total expenditure stood at Rs374 billion, which included current expenditure of Rs261 billion and development expenditure of Rs118 billion.

Former Finance Minister Dr. Hafiz Pasha said in a statement that this was a large budget deficit of the federal and provincial governments combined of Rs5.26 trillion in financial year 2021-22. He said this was probably the highest ever deficit, even larger than the earlier peak deficit of 8.9% of GDP in 2018-19. He pointed out that the public finances, especially expenditures by the line ministries and the state-owned enterprises, appear to be increasingly out of control of the Ministry of Finance.

However, he noted that the budgetary outcome in financial year (2022-23) is expected to represent an improvement in the budget and primary deficits of three or more percent of GDP. He further said that the huge federal deficit has been financed to the extent of almost 80% by domestic bank borrowing. This has implied higher monetary expansion by over 20%, which is bound to increase pressure on the price level in 2022-23.

Credit : Independent News Pakistan-WealthPk