ISLAMABAD: Pakistan’s budget deficit has widened to a whopping Rs2.26 trillion or 6.6 per cent of gross domestic product (GDP) in the outgoing fiscal year (2017-18), the highest in five year term of PML-N government.
The PML-N government had revised the initial target of reducing the budget deficit from 4.1pc of GDP to 5.5pc for the outgoing fiscal year, but it failed to achieve both targets by a wide margin. Three provincial governments also failed to present surplus budgets during the period under review.
After coming into power, PML-N government held out an assurance to the International Monetary Fund (IMF) to decrease fiscal deficit from 8pc in 2012-13 to 3.5pc within the next three years. In retrospect, the actual fiscal deficit ended up at 5.5pc in 2013-14, 5.3pc in 2014-15 and 4.6pc in 2015-16.
A similar trend was witnessed in the FY 2016-17 when the country’s deficit went up to 5.8pc against the target of 3.8pc. During these years, expenditures and revenues were also significantly off target.
The summary of consolidated federal and provincial budgetary operations 2017-18 released by the ministry of finance said the major contribution to this historic fiscal deficit came from fiscal indiscipline of three provinces. The highest deficit was booked by PPP-led Sindh government at Rs42.3 billion followed by PML-N Punjab government with Rs6.6bn and PML-N-led Balochistan government also contributed its bit with Rs7.83bn.
Only Khyber Pakhtunkhwa posts Rs34.4bn surplus
PTI-led Khyber Pakhtunkhwa government emerged as the only province which posted budget surplus of Rs34.4bn in the outgoing fiscal year.
During the period under review, provincial expenditure also surged to 6pc of GDP in 2017-18 against 4.8pc of GDP four years ago in 2013-14. The armed forces spending reached to Rs1.03tr against the last year spending of Rs888bn, reflecting an increase of Rs142bn or 16pc. The defence expenditure amounted to 3pc of GDP during 2017-18 relatively higher than 2.8pc in 2016-17.
The federal government during the outgoing fiscal year managed to cumulatively borrow sums worth Rs2.26tr from external and domestic sources. Of these, the government obtained Rs785.2bn from external sources and ended up raising Rs1.47tr from domestic lenders.
Overall, total expenditure of federal and provincial governments clocked in at Rs7.488tr in 2017-18 against Rs6.8tr for 2016-17, reflecting an increase of 10pc.
The total revenue slightly fell to 15.2pc of GDP in 2017-18 from 15.5pc of GDP last year.
Further analysis shows tax revenue improving to 13pc of GDP in the outgoing fiscal year compared to 12.5pc in 2016-17.
On the other hand, total expenditure registered a restrained increase reaching 21.8pc in fiscal year 2017-18 from 21.3pc in the previous year. On the other hand, federal government expenditure increased to 12pc of GDP in 2017-18 against 11pc during previous year.
Development expenditure on the other hand slightly fell to 4.7pc of GDP or Rs1.62tr in 2017-18 compared to 5.3pc of GDP or Rs1.69tr in 2016-17.
The GDP volume was posted at Rs34.39tr in 2017-18 as compared to Rs31.86tr during 2016-17.
Total revenue in absolute terms was recorded at Rs5.228tr against Rs4.936tr same period last year, posting 6pc growth. Of these, tax revenue posted a remarkable growth of 20.8pc rising to Rs4.467tr in 2017-18 against Rs3.969tr in the last fiscal year.
Published in Dawn, August 26th, 2018