ISLAMABAD, June 5: The country has brought down its fiscal deficit from 5.2 per cent of GDP in 2001-02 to 4.6pc during the current financial year, claims Economic Survey 2002-3.

The survey was released at a news conference addressed by Finance Minister Shaukat Aziz here on Thursday.

According to the survey, defence expenditure has increased from the last year’s Rs149 billion to Rs158 billion in 2002-3, showing an increase of 6pc. It was budgeted to decline marginally in terms of the percentage of GDP from 4.1pc to 3.9pc, but the survey claimed that defence expenditure had been continuously declining over the last decade.

Referring to the federal budget, the survey said the budgeted gross revenue receipts of Rs660.3 billion for 2002-3 were 13.1pc higher than the revised estimates of Rs584 billion in 2001-02. These revenue receipts comprise tax revenue totalling Rs530.2 billion and non-tax revenue worth Rs130.1 billion.

The survey said tax and tariff reforms as well as reforms in tax administration had started paying dividend. Tax collection by the Central Board of Revenue had picked up, revenue deficit narrowed down, and primary surplus increased. Consequently public debt, both in obsolete term and in percentage of GDP, declined, the survey said.

Consolidated revenue in 2002-3 is estimated at Rs706.1 billion as against Rs624.1 billion last year, thereby registering an increase of 13.1pc. Total consolidated expenditure is estimated at Rs892.5 billion which is 8pc higher than the last year’s.

The survey says interest payment is single largest item of total as well as current expenditure. Its share in total expenditure has declined from 34.7pc in 2000-01 to 31.6pc in 2001-02 and further to 27.1pc in 2002-3.

As percentage of GDP, the survey says, public debt has declined to 90.7pc in 2002-3. The public debt payment in rupee has increased in obsolete term from Rs1.71 trillion last year to Rs1.74 trillion during the outgoing fiscal year. The public debt was 317pc of total revenue in 1980, increased to 505pc in 1990, and was 679pc in 2001. It has now been narrowed to 515pc of total revenue in 2002-3.

The debt payment in foreign exchange as percentage of GDP stood at 34pc in 1980, increased to 49pc in 1990, and further to 52.2pc by mid-2000. However, it has declined to 47.2pc of GDP in 2002-3, registering a fall of more than 7 percentage points of the GDP in one year mainly because of sharp appreciation of rupee against US dollar. “Had there not been a roughly 12pc appreciation of Pak rupee vis-a-vis the US dollar, the situation would have been very serious bringing more economic problems for Pakistan,” Mr Aziz maintained.

The survey pointed out that during the first nine months of the current financial, domestic debt in obsolete term rose only by Rs13 billion or by 0.7pc in nominal terms. However, as percentage of GDP, it has declined from more than 52.7pc in 2000-01 to 47.2pc in 2001-02 and is to decline further to 44.4pc in 2002-3.

The survey, perhaps for the first time, conceded that tax administration and enforcement were selective and skewed in favour of those with ability to defeat the system. “The combined effects of these weaknesses resulted in low and stagnant tax-to- GDP ratio on the one hand and low tax elasticity and buoyance on the other. The low and stagnant tax-to-GDP ratio compelled successive governments to generate resources through surcharges and non-tax revenues,” the survey regretted.

The survey warned that the best reform strategy applied to the system would fail, if there was a lack of political will to implement it. It said while some initial technical support could sometimes be obtained from foreign experts, a critical core of local expertise was needed to take full advantage of such assistance.

The survey admitted that corruption and tax evasion were widespread. It said tax collection system designed to eradicate corruption and evasion had failed in developing countries, indicating that these problems were structural in nature. The main reason for the failure is that most tax administrations systems have been influenced by the tax systems. In fact, the survey advised, tax structure and administration were interdependent and should be considered as such.