Budget deficit climbs to Rs3.403tr

ISLAMABAD: Pakistan’s overall budget deficit has risen to a staggering Rs3.403 trillion, equivalent to 7.1 percent of Gross Domestic Product (GDP), in fiscal year 2020-21 that ended on June 30, 2021.

The primary deficit, which is considered as sacrosanct under the IMF program, stands at Rs653.5 billion or 1.4 percent of GDP. The government had revised upwards the budget deficit target to 7 percent but it went up to 7.1 percent of GDP.

Many independent economists were predicting that the fiscal deficit might hover around 7 to 7.5 percent of GDP for the last fiscal year ending on June 30, 2021. The country’s interest payments of domestic and foreign loans as well as defence spending have outpaced development and other expenditures in the last fiscal year 2020-21.

The budget deficit in the last three years under the PTI led regime remained on higher side as it stood at 7.1 percent of GDP in 2020-21, 8.1 percent of GDP in 2019-20 and 8.9 percent of GDP in 2018-19.

The gross revenue receipts stood at Rs6.269 trillion and after making payment to the provinces under the NFC Award to the tune of Rs2.741 trillion, the federal government was left with net revenue receipts of just Rs3.5 trillion. So if added with non tax revenues of Rs1.4 trillion, the Centre could be left to only meet expenditure of markup repayment on debt and defence.

However since, the Centre has to meet all remaining expenditures of development, pensions, running of civil government, subsidies and others through loans, the debt burden is bound to escalate for financing the yawning budget deficit.

According to fiscal operations for 2020-21 released on Thursday, the mark-up payment remained the largest head on expenditure front as it consumed Rs2,749 billion, including repayment on domestic debt of Rs2,523.8 billion and on foreign loans of Rs226 billion. The defence spending remained the second largest head as it utilized Rs1,316.48 billion. The utilization of the federal Public Sector Development Program (PSDP) stood at Rs441 billion (net excluding grants to provinces) while provinces utilized development funding of Rs770.2 billion in 2020-21. The pension liabilities consumed Rs440 billion at the federal level, running of civil government Rs505.8 billion, subsidies Rs425 billion and grants to others Rs823 billion during the last fiscal year.

Pakistan’s total revenues fetched Rs6.93 trillion in the last fiscal year out of which federal revenues stood at Rs5.272 trillion including federal revenues of Rs4.7 trillion collected by FBR and Rs508 billion collected by the provinces. The non-tax revenues fetched another Rs1.6 trillion, including federal level of Rs1.48 trillion and Rs150.2 billion by the provinces.

The government has been able to generate Rs424.654 billion through imposition of Petroleum Levy and Rs650.5 billion through profit from State Bank of Pakistan. The government has managed to only collect Rs19 billion as Gas Infrastructure Development Cess (GIDC). Total booked expenditures stood at Rs10.3 trillion out of which the current expenditures consumed Rs9.01 trillion in the last fiscal year. The mark-up payment on loans consumed Rs2.74 trillion, defence Rs 1.316 trillion, development expenditures and lending Rs1.315 trillion.

The statistical discrepancy stood at Rs92.995 billion in the last fiscal year. After making payment to the provinces to the tune of Rs2.74 trillion under the NFC Award, so the budget deficit rose to Rs3.4 trillion to meet the expenditure heads. The budget deficit stood at Rs3.4 trillion, which was financed by external and domestic borrowings.