Big hike in SBP profit helps cut fiscal deficit to 2.3pc of GDP

Updated February 15, 2020

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According to ministry data, country’s revenue in the first half of 2019-20 was Rs3.23tr, up from Rs2.33tr last year. — Dawn/File
According to ministry data, country’s revenue in the first half of 2019-20 was Rs3.23tr, up from Rs2.33tr last year. — Dawn/File

ISLAMABAD: A massive surge of about 600 per cent in profit of the central bank and 221pc increase in the non-tax revenue served to contain the country’s fiscal deficit in the first half of the current fiscal year (July to December 2019) to Rs995 billion, or 2.3pc of its gross domestic product (GDP), despite a record revenue shortfall.

The overall fiscal deficit was significantly lower than Rs1,030bn (2.7pc of the GDP) recorded in the first half of last fiscal year when the full-year gap between the country’s income and expenditure was a record 8.9pc of the GDP — the highest in the post-Bangladesh period for which comparable data is available.

The fiscal deficit of the federal government was almost unchanged in absolute numbers at Rs1.286 trillion (2.9pc of GDP) at end of December 2019 when compared to Rs1.274tr (3.3pc of GDP) at the end of December 2018. However, the four provinces helped reduce the federal deficit by offering a Rs324bn cash surplus, almost 31pc higher than last year’s Rs247bn.

The provisional data released by the finance ministry on Friday showed a profit of Rs427bn for the State Bank of Pakistan (SBP) in the first six months of the fiscal, almost 578pc higher than Rs63bn in the same period last year. The SBP profit has come mostly from government borrowing and increase in its policy rate from about 6pc to 13.25pc.

According to ministry data, country’s revenue in the first half of 2019-20 was Rs3.23tr, up from Rs2.33tr in the same period last year

The total non-tax revenue — of which the SBP profit is a part — stood at Rs719bn at the end of December 2019 as compared to Rs224bn at the end of December 2018, up by 221pc. A major non-tax revenue contribution came in the shape of the Rs112bn profit from another regulator — the Pakistan Telecommunication Authority (PTA) — on account of the telecom fee. The PTA profit was only Rs16bn during the comparable period last year.

Another major contribution of Rs138bn in revenue came from petroleum levy, which was more than 68pc higher than last year’s Rs82bn. The amount collected under ‘other taxes’ stood at Rs157bn in the first half of this year when compared to Rs99bn in the same period last year, an increase of 60pc.

The data also showed the country’s total revenue in the first half of the year amounted to Rs3.23tr when compared to Rs2.33tr in the same period last year, an increase of Rs39pc. The total tax revenue was reported at Rs2.46tr compared to Rs2.08tr in the same period last year, showing an increase of 18.4pc.

The tax collected by the Federal Board of Revenue, on the other hand, amounted to Rs2.1tr in this fiscal, compared to Rs1.79tr in the same period last year, showing an increase of 16.6pc instead of the 43pc growth promised in the budget.

Out of this, the federal taxes amou­nted to Rs2.25tr this year against Rs1.89tr last year, up almost by 19pc. Pro­v­incial taxes amounted to Rs214bn in this fiscal, compared to Rs188bn last year, an increase of 14pc.

The total expenditure in this per­iod stood at Rs4.227tr against Rs3.357tr in the same period last year, greater by 26pc. Out of this, current expenditure in the first six months of this fiscal year amounted to Rs3.72tr compared to Rs2.98tr last year, showing an increase of about 25pc.

A total of Rs1.28tr was spent on making mark-up payments in this period against Rs877bn in the same period last year, an increase of 46pc. Defence expenditure was up 10.4pc in the six months this year and was recorded at Rs530bn compared to Rs480bn last year. However, as a percentage of GDP defence spending remained unchanged at 1.2pc.

The ministry said the revenue to GDP ratio was 7.3pc at the end of the first half of the fiscal against 6.1pc last year, while tax revenue inched up to 5.6pc of the GDP against 5.4pc last year.

The non-tax revenue registered a significant growth of 1.7pc of the GDP in the first half of this fiscal, compared to just 0.6pc last year.

Similarly, the total expenditure at the end of December 2019 increased to 9.6pc of the GDP when compared to 8.7pc of the GDP last year. The current expenditure also jumped to 8.5pc of the GDP against 7.8pc last year. This was due to the 2.9pc of the GDP spent on mark-up payments against 2.3pc last year.

The primary balance was reported at 0.7pc of the GDP, or Rs286bn, at the end of first half of the current fiscal year.

Published in Dawn, February 15th, 2020