ISLAMABAD: Pakistan’s overall fiscal deficit — the difference between income and expenditure — clocked in at 0.9 per cent of the gross domestic product (GDP), a marginal reduction from the 1pc recorded in the same period of the previous year.
In absolute terms, the fiscal deficit rose to Rs962.80 billion during the first quarter of FY24 from Rs819.30bn in the corresponding period last year, according to the Fiscal Operations Data released by the Ministry of Finance on Wednesday.
However, the fiscal deficit could be Rs1.014 trillion in the first quarter of FY24 if not contained by cash surpluses from Balochistan and Sindh provinces. In contrast, during the first quarter of FY23, cash surpluses were generated by all four provinces, narrowing the federal government deficit to Rs1.037tr.
In the first quarter, the total revenue was 2.5pc of GDP, a slight increase from 2.4pc during the same period last year. This marginal growth is primarily attributed to an increase in non-tax revenue, which rose from 0.3pc of GDP in the previous fiscal year to 0.4pc in 3MFY24. Meanwhile, tax revenue remained unchanged.
In the first quarter of FY24, Balochistan made the highest cash surplus contribution of Rs71.16bn, followed by Sindh with Rs19.09bn. Punjab, on the other hand, did not have any surplus and overspent by Rs28.55bn, with Khyber Pakhtunkhwa following at an overspend of Rs10.31bn to contain the overall fiscal deficit.
This seemingly indicated that the two provinces — Balochistan and Sindh — could not use their revenue share to enhance their residents’ living standards and instead financed the federal government’s deficit.
The financial activities revealed that the government largely failed to manage the budget deficit. This was due to an increase in expenditures and revenue collections not meeting expectations, especially the tax revenues.
It was clear that total revenues, which were at 2.5pc of GDP, were just above the 2.4pc from the same period last year. Meanwhile, expenditures remained at 3.4pc of GDP, the same as last year’s percentage.
The overall primary balance — the difference between revenues and expenditure excluding interest payments — was reported at Rs416.811bn or 0.4pc of GDP in 3MFY24. In the comparable period of last year, the primary balance was Rs134.68bn or 0.2pc of GDP.
The first quarter of the FY24 reported total revenue at Rs2.68tr, or 2.5pc of GDP, while total expenditure was Rs3.64tr, or 3.4pc of GDP. Tax revenue for the first quarter amounted to Rs2.21tr, or 2.1pc of GDP, a slight improvement from Rs1.78tr, or 2.1pc of GDP, during the same period last year.
Non-tax revenue was Rs468.81bn, or 0.4pc of GDP, a slight increase from Rs234.91bn, or 0.3pc of GDP, indicating better performance.
Current expenditure for the year was Rs3.17tr, or 3pc of GDP, compared to Rs2.53tr, or 3pc of GDP last year. The increase in expenditures was suggested by fiscal operations and was due to mark-up payments that were Rs1.37tr, or 1.3pc of GDP this year, compared to Rs953.99 billion, or 1.1pc of GDP last year.
Defence expenditures were Rs343.06bn, or 0.3pc of GDP, compared to Rs312.92bn, or 0.4pc of GDP last year. Development expenditure was Rs282.38bn, or 0.3pc of GDP in the first three months of FY24, compared to Rs219.96bn, or 0.3pc of GDP last year.
The data indicates that the government collected only Rs222.06bn in petroleum levy in the first quarter of the current fiscal year compared to Rs47.47bn collected during the same period last year. This clearly shows a substantial amount in levy collection.
Published in Dawn, October 26th, 2023
