Uplift spending slashed by Rs200 bn to contain budget deficit

ISLAMABAD: In a bid to contain the budget deficit at slightly over five percent of the GDP in line with revised fiscal framework agreed with the IMF, the government has slashed down development spending by Rs200 billion.

This has been done for empowering FBR for collection of the gas infrastructure development cess (GIDC) and maximising efforts on part of the tax collection machinery for achieving its fixed target of Rs4,013 billion during the current fiscal year.

“The fiscal framework has been re-adjusted with the IMF in order to contain the budget deficit within the desired limits of slightly over five percent of the GDP against earlier envisaged target of 4.1 percent on eve of budget 2017-18. Islamabad does not expect any reimbursement on account of the Coalition Support Fund (CSF) from the USA in remaining months of the current fiscal year, so non-tax revenue target will be missed out,” top official sources confirmed to The News here on Thursday.

On the basis of revised fiscal framework finalised with the IMF staff, the Fund’s Executive Board is scheduled to meet in Washington DC on coming Monday for approving its report under Post Programme Monitoring (PPM) which will be released in coming weeks.

For reaching consensus on agreed fiscal framework, the Public Sector Development Programme (PSDP) was slashed down by Rs200 billion, bringing down from Rs1,004 billion to Rs800 billion for the current fiscal year.

According to official documents, the federal government so far released the PSDP funds of Rs525 billion till mid February 2018, including Rs460 billion for ministries/divisions and attached departments and Rs65 billion for expenditures on the IDPs and PM’s discretionary programmes. Against release amount of Rs525 billion, the actual spending will be definitely less than the released amount.

“Keeping in view existing pace, it will be simply impossible to utilise whole amount of the PSDP at federal level,” one top official confirmed when sought his views here on Thursday. The government had made commitment of releasing 35 percent funding in the last quarter (April-June) period which in accordance with original plan, means releases of around Rs350 billion just in last quarter, and experts believe it cannot happen under the existing circumstances.

The government had also imposed ban on re-appropriation of development and non-development funds. The Finance Ministry also asked the ministries to surrender funds by mid of April because the government wants to present next budget in early May this year.

When the ministries will be surrendering funds how they will be able to seek increased demands of funds in April 2018, so the Finance and Planning managers knew how they would manage to curtail development utilisation within the fixed limits.

On issue of the GIDC, the government has revised downward its collection from Rs110 billion to Rs55 billion in line with the agreement of the IMF. Now the Finance Ministry has proposed certain clauses into GIDC collection mechanism that instead of giving this authority into hands of the SSGC and the SNGPL, the government can ask the FBR to collect the amount from concerned stakeholders by just attaching their accounts. The CNG Association has also agreed to contribute their part in terms of paying dues on account of the GIDC.

Now the government has envisaged Rs979 billion on account of non-tax revenue in the current fiscal year out of which Rs141.797 billion was envisaged in shape of Defence Service Receipts. These defence service receipts which Islamabad used to get from Washington no more seem feasible, so the fiscal framework re-adjusted accordingly. On the FBR’s target, the official sources said that the FBR will make efforts to achieve its desired target of crossing Rs4,000 billion mark during the current fiscal year.