ISLAMABAD: Pakistan’s first-quarter fiscal deficit fell below one per cent of GDP – lowest in 10 years – despite some slippages in non-tax revenues, particularly due to the non-realisation of disbursements from the United States.

“The overall deficit decreased to 0.9pc in the first quarter of 2017-18 compared to 1.3pc recorded in the first quarter of last year,” said the Ministry of Finance after a review meeting presided over by Finance Minister Ishaq Dar that finalised provisional accounts for July-September.

A senior government official told Dawn the meeting noted the slippages in non-tax revenue and decided to make adjustments down the road to achieve annual targets. “Pakistan will not be getting Rs122 billion budgeted against the Coalition Support Fund (CSF) because of the change in the US policy. Plain and simple,” the official said.

“We are not worried about the CSF blockade. But obviously, we have to make up for this gap,” the official added.

Also, there were some usual issues with the finalisation of accounts of public-sector entities that offer dividends to the national kitty. The companies have different accounting cycles. They do not necessarily offer dividends every quarter, but are ultimately available by the end of the fiscal year.

Quarterly tax collection grows 20pc

Perhaps encouraged by the quarterly performance, Mr Dar is expected to attend annual meetings of the International Monetary Fund and the World Bank in Washington later this month. Earlier, he planned to skip these meetings because of the ongoing reference in an accountability court.

Briefing meeting participants, Finance Secretary Shahid Mahmood presented provisional data on fiscal operations, saying the first quarter had “closed on strong fiscal performance”.

He said the tax collection remained robust at Rs765 billion in July-September, showing a 20pc growth over the comparable period of last year. Because of the higher collection, amounts transferred to the provinces also increased substantially. Compared to the transfers of Rs416bn a year ago, total transfers, including arrears, have reached Rs570bn so far this year.

As a result of better tax collection, interest payments were contained on the lower side compared to last year.

The meeting was informed that the federal government maintained strict fiscal discipline on the expenditure side. Against the total expenditure of Rs914bn in the first quarter of 2016-17, the government spent Rs894bn in July-September, down 2.2pc. This was despite the fact that increased investments were carried out through the development budget, the ministry said.

The overall budget deficit was recorded at Rs324bn in the first quarter compared to Rs438bn a year ago. This was made possible through the robust tax collection and lower expenditure. A reduced fiscal deficit means lower public debt accumulation, which supports alignment to targets defined in the amended Fiscal Responsibility and Debt Limitations Act, an official statement said.

The statement quoted the finance minister as expressing satisfaction with growth in the revenue collection by the Federal Board of Revenue and appreciated the measures taken to achieve fiscal prudence in the first quarter. He reiterated the government’s resolve to continue on the path of fiscal discipline and directed officials concerned to ensure the achievement of fiscal targets in the remaining three quarters of the fiscal year.

While commending inflation containment, low interest rates, strong growth in large-scale manufacturing and recent increase in exports and remittances, the finance minister stressed the need for maintaining focus on the acceleration of economic growth for a continued reduction in unemployment and poverty.

Published in Dawn, October 10th, 2017

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