Rs1,922 billion highest budget deficit in nine months

ISLAMABAD: Owing to zero growth in total revenues and increase in interest payment and defence expenditures by 24 percent, Pakistan’s budget deficit has sharply widened to Rs1922.4 billion or 5 percent of GDP in first nine months of the current fiscal year.

This is highest ever budget deficit materialised in first nine months in percentage of GDP during the last 30 years since 1991. The budget deficit both in absolute figures and in percentage of GDP worsened on the pattern of decade of 1990s.

The gap between total revenues and expenditures of the country known as budget deficit have increased manifold, posing serious threat to the economy where the budget deficit might escalate in the range of 7.6 percent of Gross Domestic Product (GDP).

It is worrisome indicator that the total revenues achieved zero growth and stood at Rs3583 billion in first nine months (July-March) period of current fiscal year 2018-19 against Rs3582 billion in the same period of the last financial year 2017-18 registering zero growth. The FBR’s tax increased slightly while non-tax revenues witnessed massive decrease as it stood at Rs421.605 billion in the first nine months of the current fiscal against Rs506.174 billion in the same period of the last financial year.

The overall current expenditures have gone up by 18 percent so far in the current fiscal year. The interest payment on account of loans went up to Rs1499 billion in first nine months of the current fiscal against Rs1172 billion. The defense spending has been increased to Rs774 billion in current fiscal so far against Rs623 billion in same nine months of the last financial year.

“Alarmingly, the development spending was slashed down by negative 32 percent in first nine months of the current fiscal year that had negatively impacted the GDP growth by 2 percent. It would result into losing jobs for 0.3 million people,” former Finance Minister and reputed economist Dr Hafiz A Pasha said while talking to The News here on Tuesday.

He mentioned that the interest payment on foreign debt went up by 80 percent in dollar terms indicating that the country had plunged into debt trap. After devaluation of 22 percent, he said the interest payment on foreign debt increased by 60 percent that demonstrated this fact that the short term maturity of loans might mount further pressures on the economy. He said that the foreign direct investment declined by 64 percent. He said that the development spending of provinces were slashed down by 52 percent and resulting into slowdown of the economy.

Dr Pasha projected that the budget deficit could go up to 7.6 percent of GDP till end June 2019.

According to fiscal operation released by Finance Division on Tuesday showed that the revenues remained stagnant but expenditures overrun had resulted into widening gap on budget deficit front during the current fiscal year.

The budget deficit of Rs1922 billion was financed through domestic borrowing of Rs1398 billion and foreign avenues of Rs524 billion.

When contacted on Tuesday night, the Finance Ministry spokesman said that the revenue shortfall had resulted into hiking the budget deficit by 1 percent of GDP and secondly the discount rate increase jumped up the interest payment on loan repayments. The official sources said that the FBR faced revenue shortfall mainly because of different factors including slow down of economy and slashing down of developments funds, suspension of tax on account of prepaid cards which was now restored by the Supreme Court of Pakistan, import compression, reduced tax rates on POL products which was now brought at standard rate of GST and overall bad performance of manufacturing sector during the outgoing fiscal year.