Debt servicing outpaces defence, development spending in Q1

ISLAMABAD: Debt servicing on both local and foreign loans has massively outpaced defence and development spending during the first quarter of the current fiscal year of 2018/19 as fiscal deficit widened to Rs541.6 billion or 1.4 percent of GDP during the period, official data revealed on Friday.

Ministry of finance’s data showed that fiscal deficit stood at 1.2 percent of GDP during the corresponding period of the previous fiscal year when the Pakistan Muslim League-Nawaz was ruling over the country.

Anticipating the possible surge, the recently-concluded International Monetary Fund’s mission asked Islamabad to take tough measures to bring down the deficit within the desirable limit.

In July-September, the mark-up on loan payments emerged as the number one expenditure item as it consumed Rs507 billion, while defence spending stood at Rs219 billion and development expenditures and net lending at Rs108 billion.

Ironically, the total development expenditures in overall public sector development program (PSDP) slowed down as total PSDP expenditures at the federal level were recorded at Rs50 billion and provincial expenditure at Rs55.7 billion in the first three months period.

The July-September budget deficit was financed through domestic and external borrowings of Rs330.9 billion and Rs210.7 billion, respectively.

The country’s fiscal operations, unveiled by the finance ministry, showed that the statistical discrepancy resurfaced in the first three months with mark of Rs54.8 billion.

The pace of getting loans did not reduce under the Pakistan Tehreek-e-Insaaf- (PTI) led regime. Rather, pace of surge in debt burden speeded up.

The expenditures are increasing and tax collection on account of both the Federal Board of Revenue (FBR) and non-tax revenues are decreasing, resulting into widening of budget deficit. Given the existing pace, the budget deficit might go up close to seven percent of GDP by June-end.

A top finance ministry official, when contacted, said the government brought forward the supplementary budget with a vision to slash the budget deficit to 5.1 percent in FY2019.

“The pace of increasing deficit would significantly be reversed in the second quarter,” the official said.

But, the continuous tax shortfall being faced by the FBR is likely to make it difficult for the PTI-led regime to deliver on its claim to reduce the budget deficit from the ongoing second quarter.

Government fetched total revenues of Rs1.103 trillion in the first quarter; out of which tax revenues stood at Rs975.2 billion and non-tax revenues Rs126.89 billion.

Of the total tax revenues, the federal taxes fetched Rs886.53 billion and provinces collected just Rs88.6 billion in the first three months of the current fiscal year.

The federal government transferred Rs662.8 billion to the provinces in the first quarter and therefore it was left with no other option but to seek loans to finance its budget deficit.

The non-tax revenue collection at federal level stood at Rs116.4 billion in the July-September period as against Rs113 billion in the same period a year earlier. Of total non-tax revenue collection at the federal level, a major chunk came through surplus profit of Rs50 billion earned by the State Bank of Pakistan and Rs23 billion in shape of royalties on oil and gas.

The ministry of finance’s data showed that total booked expenditures amounted to Rs1.643 trillion; of which current expenditures stood at Rs1.479 trillion with major expenditure on account of debt servicing on public debt with utilisation of Rs509 billion.