Government claims curtailing budget deficit at Rs3,376 bn

ISLAMABAD: The government on Tuesday informed the Federal Cabinet that the budget deficit was curtailed at Rs3,376 billion, equivalent to 8.1 percent of GDP against projection of 9.1 percent of GDP for last fiscal year ended on June 30, 2020.

In the wake of lingering COVID-19 pandemic, the overall fiscal woes continued to haunt the economic managers as the situation could not be termed as comfortable because Pakistan’s economy could not afford such high level deficit on sustained basis. The budget deficit ultimately turns into increasing burden of debt and liabilities that is all set to cross 100 percent of GDP when the final figures for 2019-20 will be released by the State Bank of Pakistan in days to come.

Keeping in view expenditure side rigidities, the Ministry of Finance issued Office Memorandum (OM) for Austerity Measures for the current fiscal year for 2020-21 for President House, PM House, all federal ministries, Supreme Court of Pakistan, Islamabad High Court, National Assembly, Senate, Finance Division (Military) and many other federal departments that there would be complete ban on purchase of all types of vehicles (excluding motorcycles) both for current as well as for development expenditures.

There will be ban on creation of new posts except those required for development projects and approved by the competent authority. The privilege of periodical, magazine, newspapers etc. to the entitled officers will remain restricted only to one. The principal accounting officer to rationalise expenditure during critical economic constraints besides to cater the needs of ministries/divisions/departments and organisation, the competent authority is also pleased to constitute Austerity Committee to review unavoidable expenditures under additional Finance Secretary Expenditures.

However, the government claims it’s an achievement of the incumbent regime for restricting the budget deficit at 8.1 percent of GDP but in absolute terms the budget deficit remained second highest in country’s history as the PTI-led government made record of jacking up the fiscal deficit to Rs3,444 billion in first year rule in 2018-19 when it had touched 8.9 percent of GDP.

The primary deficit that was considered one of the major conditions under $6 billion Extended Fund Facility of the IMF programme for Pakistan that was kept at Rs756.81 billion or 1.8 percent of GDP for last fiscal year 2019-20 against IMF projection of negative 3.1 percent of GDP.

There is another worrisome development that the statistical discrepancy increased to Rs89 billion in fiscal year 2019-20 against Rs22.4 billion for 2018-19 indicating that it went up despite having meager amount in overall massive budgetary numbers that runs into trillions of rupees.

However, the development spending both at federal and provincial levels remained lower as federal Public Sector Development Programme (PSDP) utilisation stood at Rs467 billion and provinces Rs641 billion.

According to presentation given by Adviser to PM on Finance before the Federal Cabinet stating that the total revenues fetched Rs6,272.168 billion including tax revenues of Rs4,747 billion and non-tax revenues of Rs1,524 billion. The FBR’s collection stood at Rs3,997.921 billion in last fiscal year 2019-20 while all four provinces collected meager amount of just Rs413.617 billion.

Out of total non-tax revenue collection of Rs1,524.366 billion, the federal government collected Rs1,421.977 billion while provincial government fetched Rs102.3 billion. Total expenditures of the country consumed Rs9,648.488 billion in last fiscal year out of which the current expenditures utilised major chunk to the tune of Rs8,532.02 billion. The federal current expenditures consumed Rs6,016.19 billion while provinces utilised Rs2,515.8 billion on current expenditures.

The Finance Ministry stated that the remittances remained all time high despite COVID-19 pandemic. The PSDP utilisation went up as Finance Ministry dispensed with the requirement of ways and means.

The refunds were paid highest and the government ordered release of Rs40 billion refunds on recent last Monday. The Current Account Deficit was brought down from $20 billion in 2018-19 to $3 billion in 2019-20. The foreign currency reserves increased from $8.5 billion to $12.5 billion held by the SBP.