First six months of fiscal year: Budget deficit widens up to 2.5pc of GDP

ISLAMABAD: Pakistan’s budget deficit has risen to Rs1,137.925 billion, equivalent to 2.5 percent of the Gross Domestic Product (GDP), in the first half (July-Dec) of the current fiscal year against 2.3 percent of the GDP in the same period of the last financial year.

The major revenue spinners of non-tax revenues are the surplus profit of the State Bank of Pakistan (SBP), up to Rs372 billion, and the second highest revenue getting sector is the petroleum levy up to Rs275.317 billion in the first six months of the current fiscal year. If the petroleum levy had not fetched the additional non-tax revenues, then the deficit might have risen further in the first six months of the ongoing fiscal year. Despite these harsh measures, the budget deficit has exceeded at a higher pace in the first half of the current fiscal year compared to the same period of the last year.

The debt servicing and defence continued to remain on the higher side in the first half of the current fiscal, while development spending touched the lowest ebb among expenditure heads. The utilisation of the Public Sector Development Program (PSDP) at the federal level stood at Rs175 billion in the first six months. The budget deficit has climbed up to the highest level of Rs1,137.925 billion or 2.5 percent in the first six months against Rs994.71 billion or 2.3 percent of GDP in the same period of the last fiscal year, indicating that the budget deficit exceeded in terms of the GDP percentage in the current fiscal than the same period of the last year.

The overall budget deficit had climbed to Rs3,376.3 billion or 8.1 percent of the GDP in the last fiscal year 2019-20, mainly because of the eruption of Covid-19 pandemic in the second half (Jan-June) in the wake of increased expenditures. However, it would be difficult for the PTI-led regime to keep the fiscal deficit within the desired limits of 7 percent of the GDP, keeping in view the performance of the first half of the current fiscal year.

According to a provisional summary of the fiscal operation, released by the Ministry of Finance on Wednesday, the country had fetched total revenues of Rs3.351 trillion in the first six months of the current fiscal year, out of which, the FBR collection stood at Rs2,210 billion and the provincial taxes Rs245 billion. The non-tax revenues collection stood at Rs895 billion as non-tax collection at federal level fetched Rs848 billion, while the provincial non-taxes brought Rs47.218 billion.

The total expenditures stood at Rs4.489 trillion in the first six months of the current fiscal year, out of which, the current expenditures had been standing at Rs4.02 trillion. The mark-up payments remained the highest among expenditure heads as it stood at Rs1.475 trillion, while the defence spending stood at Rs486 billion.

The development and net lending stood at Rs457 billion and the statistical discrepancy was standing at just Rs1.898 billion. The overall budget deficit stood at Rs1.137 trillion or 2.5 percent of the GDP in the first six months of the current fiscal year. However, the primary balance remained positive at Rs337.233 billion in the first six months of the current fiscal year.

The budget deficit of Rs1.137 trillion was financed through external borrowing of Rs0.454 trillion and domestic borrowing of Rs0.683 trillion. The development spending stood at Rs403 billion at the national level but at the federal level, the development spending has been just Rs175 billion, while the provincial spending has been Rs227.6 billion in the first six months of the current fiscal year.