ISLAMABAD: Pakistan’s fiscal imbalance has further worsened and the budget deficit is all set to exceed by touching absolute historic peak figures of Rs2.8 trillion till end June 2019.
The escalation in budget deficit can be attributed to Rs450 billion revenue shortfall being faced by the FBR that is 1.3 percent of GDP, increasing requirement of debt servicing in the wake of increased discount rates and surge in defense spending owing to tension with India.
The IMF has asked Pakistan to take additional tax measures of Rs730 billion or 1.7 percent of GDP in the upcoming budget to make massive fiscal adjustments for moving towards surplus primary balance.
The delayed decision taken by the government for approaching the IMF has limited option for it. Now the government is making last ditch effort to convince the IMF team to fix the target in the range of Rs5,250 billion against the IMF estimates of FBR’s potential to generate Rs5,590 billion.
The FBR has projected that its revenue collection could touch Rs4,050 billion or 10.7 percent of GDP during the outgoing fiscal year. However, independent economists argue that the FBR’s collection could not cross Rs3,950 billion in case no amnesty is introduced.
The budget deficit is expected to embark upon historic peak in terms of absolute figures during the first year rule of PTI government by touching a whopping figure of Rs2.8 trillion or 7.6 percent of Gross Domestic Product (GDP).
“The budget deficit is projected to exceed by Rs600 billion more and going to touch Rs2.8 trillion till end June 2019 during the outgoing fiscal year of PTI regime against Rs2.2 trillion in the last financial year 2017-18 under the PML (N) led regime,” said top official sources.
When contacted, former finance minister and renowned economist Dr Hafeez A Pasha said budget deficit would touch 7.5 or 7.6 percent of GDP during the outgoing fiscal year ending on June 30, 2019.
The FBR’s revenue shortfall will be standing at Rs450 billion or 1.3 percent of GDP in the outgoing fiscal year and expenditures hike would also cause increase in the budget deficit to 7.5 percent of GDP against 6.6 percent of GDP in the last financial year.
The fiscal adjustments, he suggested, should be executed in a gradual manner, as there’s no rationale to ask Pakistan for generating additional taxes of Rs700 to Rs800 billion in one year. “I have never seen such massive increase in single year,” he added.
Dr Pasha said fiscal measures should have been staggered into two fiscal years in order to fetch additional revenues to the tune of Rs700 to Rs800 billion. He warned that heavy taxation in the coming budget could further choke the economy which was already running dismally low during the outgoing financial year.
