ISLAMABAD: The country’s fiscal deficit has increased to 3.6 per cent of gross domestic product (GDP) or Rs1.652 trillion during the first nine months (July-March) of the current fiscal year despite a drastic cut in development, almost static defence expenditure, healthy provincial cash surpluses and record petroleum levy collections.
The consolidated data on fiscal operations for the first three quarters of the year released by the finance ministry on Thursday showed that the total revenue increased by 6.45pc to Rs4.99tr in nine months against a rise of about 4.2pc to Rs6.644tr in total expenditure.
The data showed that the total revenue posted a healthy growth of 12.6pc during the third quarter (January-March), but poor performance in the first two quarters pulled down the average revenue growth to 6.45pc. The total expenditure was curtailed at a nominal growth of 0.3pc but average growth in expenditure increased to 4.2pc due to higher expenditures in the first two quarters.
Also, tax revenue increased by 4.7pc to Rs3.765tr during the first nine months of the current fiscal year while non-tax revenue went up by 12pc during the same period. Current expenditure, on the other hand, increased by 8.4pc to Rs6.085tr.
The finance ministry reported that defence expenditure during the first nine months of the current fiscal year was contained at Rs784 billion, compared to Rs802bn during same period last year, showing a reduction of 2.2pc.
But more significantly, the total development spending dropped by 9.4pc to Rs654bn during the first nine months of the current fiscal year, to Rs722bn of the comparable period last year.
On top of this, the federal development spending dropped by a massive 22.5pc to Rs264bn this year, compared to Rs340bn during the first nine months last year. The provinces, however, sustained their development schemes as spending on them increased by about 2pc to Rs390bn, compared to Rs382bn during the first nine months last year.
The data showed the government collected a record Rs369bn petroleum levy during the first nine months of the current fiscal year — almost 87pc higher than last year’s Rs198bn. This is significant given the fact that the full year target for petroleum levy for the current year is Rs450bn.
As such, the finance ministry said fiscal deficit as percentage of GDP stood at 3.6pc in nine months (July-March) of 2020-21. The country witnessed 3.8pc fiscal deficit during the same period in 2019-20 and 5pc of GDP in 2018-19 — the first year under the PTI government. It may be noted that fiscal deficit ended up at 8.1pc of GDP last year and 9pc in 2018-19. This was despite the fact that the four provinces together provided about Rs413tr — over 20pc higher than Rs343bn during the same period last year.
In overall terms, the total revenue stood at 11pc of GDP during the first nine months of the current fiscal year, slightly higher than 10.7pc during the same period last year. Tax revenue inched up to 8.3pc of GDP against 8.2pc of previous year. Tax revenue also increased to 2.7pc of GDP from 2.5pc of last year.
The total expenditure increased to 14.6pc of GDP this year against 14.5pc of last year. But current expenditure increased from 12.8pc of GDP in the first nine months last year to 13.4pc this year.
Here again, a major increase was on account of markup payments which amounted to Rs2.1tr during the first nine months of the current fiscal year, compared to Rs1.88tr during the same period last year, showing an increase of about 12pc. As percentage of GDP, markup payments amounted to 4.6pc, compared to last year’s 4.3pc.
Development expenditure dropped to 1.6pc of GDP against 1.8pc of GDP, while defence expenditure went down to 1.7pc from 1.8pc.
The primary balance, on the other hand, stood at Rs562bn surplus or 1pc of GDP, compared to Rs194bn or 0.4pc of GDP last year.
The finance ministry reported that direct taxes increased by 8.8pc to Rs1.246tr or 2.7pc of GDP this year against Rs1.15tr of last year or 2.6pc of GDP. Indirect taxes, on the other hand, increased by 13.2pc to Rs2.15tr from last year’s Rs1.898tr.
Published in Dawn, May 7th, 2021