01 March 2005	Tuesday	19 Muharram 1426

KARACHI, Feb 28: Pakistan's budget deficit increased to Rs79.56 billion or 1.29 per cent of the GDP during the first half of the current fiscal year, according to data released by the Ministry of Finance.

The data reveal that total expenses of the federal and provincial governments stood at Rs503.325 billion against total income of Rs423.765 billion during July-December 2004. Thus, the government saw a budget deficit of Rs79.56 billion-equal to 1.29 per cent of the estimated GDP of Rs6164 billion.

The total revenue included tax revenue of Rs298.177 billion and non-tax revenue of Rs125.588 billion. The tax revenue included Rs265.381 billion collected by the Central Board of Revenue and Rs13.769 billion surcharges.

Surcharge on supply of gas yielded Rs9.036 billion whereas petroleum surcharge totalled only Rs4.733 billion. Had the government not capped domestic oil prices during May-November 2004 by deferring petroleum development levy, the collection through petroleum surcharge would have been much larger.

The government had to do this to keep inflation in check that even otherwise rose by 8.81 per cent year-on-year during July-December 2004. Had domestic oil prices been allowed to move up in line with international prices, inflation would have risen more rapidly.

The break-up of the CBR revenue collection shows that taxes on goods and services netted in the largest chunk of Rs147.935 billion including Rs107.32 billion sales tax.

This high level of sales tax collection points to growing economic activities in the country. Direct taxes, collected by the federal government, yielded Rs80.702 billion to the state coffers during July-December 2004.

But taxes on property collected by the provinces totalled only Rs4.226 billion, despite the fact that the real estate and housing sector saw a boom during this period. This indicates that the methods of collection of property tax are fraught with corruption and need total revamping.

The break-up of non-tax revenue shows that the largest chunk of it (Rs40.608 billion) came through commercial activities of the defence sector followed by (Rs32.367 billion) through dividend earned by the government on its shareholding in state-run organizations like PTCL and OGDC, etc.

These organizations declared historically high dividends in the backdrop of a general environment of higher corporate profitability in the country and growing interest of foreigners in telecommunication and oil and gas sectors.

The State Bank made no contribution to the non-tax revenue. Normally, profit earned by the central bank is considered part of the non-tax revenue.

On the expenditures side, current expenditures ate up Rs427.479 billion during the first half of this fiscal year. Servicing of domestic and foreign debt alone consumed more than Rs100 billion. (Domestic debt servicing accounted for Rs82.899 billion and foreign debt servicing Rs21.338 billion).

Defence affairs and services consumed another Rs101.072 billion. The expenses of provincial governments accounted for Rs116 billion. There was very little amount left to be spent on social sector.

Just how poor the social sector spending was can be gauged from the fact that education affairs and services received Rs5.507 billion; health sector Rs1.646 billion; social protection Rs405 million and housing and community amenities Rs353 million. Spending under the head of recreation, culture and religion was Rs922 million!

In addition, development spending during July-December 2004 stood at Rs81.594 billion including Rs50.706 billion spent under federal public sector development plan and Rs30.887 billion under provincial public sector development plan.