ISLAMABAD: Pakistan’s overall fiscal deficit in the first quarter (July-September) of the current fiscal year dropped to 0.8 per cent of Gross Domestic Product (GDP) or Rs438.5 billion, which is one of the lowest in the comparable period of last four years of the current government.

According to Fiscal Operations Data released by the Ministry of Finance, the total revenue in first quarter stood at 3.4pc of GDP that was better than 3.2pc of same period last year. The total revenue in the first quarter of fiscal year 2019-20 had also amounted at 3.4pc of GDP.

The data showed the overall deficit in first quarter at 0.8pc of GDP was higher than FY2019-20 when it stood at 0.7pc of GDP but was lower than 1.1pc of GDP deficit in FY2020-21 and 1.4pc of GDP in FY2018-19 – the first year of the current government.

The fiscal operations indicated that the government was able to control the budget deficit from both counts as it slighted tightened expenditures and simultaneously improved revenue collection. This was apparent from the fact that total revenues at 3.4pc of GDP were higher than 3.2pc of same period last year while expenditures were contained at 4.2pc of GDP when compared to 4.3pc of GDP.

The fiscal deficit of the federal government originally amounted to Rs715bn (1.3pc of GDP) in the first quarter but was partly funded by Rs277bn cash surplus provided by the provinces that helped contain the country’s overall deficit at Rs438.5bn. This is perhaps the first time that provinces have given such a healthy cash back with the largest contribution of Rs183bn coming from Punjab, followed by Rs60bn from Sindh and Rs36bn from Balochistan. Khyber Pakhtunkhwa, however, did not offer any surplus and in fact overspent Rs2.8bn.

Rs277bn cash back from provinces helps federal govt bring down deficit from 1.3pc of GDP

This apparently meant the provinces were unable to utilise their share in revenues to improve living standards of their population and rather funded the federal government’s deficit.

The overall primary balance — the difference between revenues and expenditure excluding interest payments — was reported at Rs184bn or 0.3pc of GDP.

The total revenue for the first quarter was reported at Rs1.808 trillion or 3.4pc of GDP while total expenditure stood at Rs2.247trillion or 4.2pc of GDP. The tax revenue in the first quarter of current year amounted to Rs1.533trillion or 2.8pc of GDP when compared with 2.5pc of GDP of same period last year, showing better performance.

Non-tax revenue, meanwhile, amounted to Rs276bn or 0.5pc of GDP, significantly lower than Rs356bn or 0.8pc of GDP, showing major slippages. Of this, the major contribution of about Rs109bn came in from State Bank of Pakistan profit that was almost unchanged when compared with last year.

Current expenditure during the current year amounted to Rs1.968 trillion or 3.7pc of GDP when compared to Rs1.8 trillion or 4pc of GDP. The fiscal operations suggested major savings in terms of expenditures emanated from mark up payments that stood at Rs622bn or 1.2pc of GDP this year when compared to Rs742bn or 1.6pc of GDP of the same period last year.

The expenditures on defence and development remained unchanged at 0.5pc of GDP in the first quarter of current and last fiscal years.

The data suggests that the government was able to collect only Rs13.34bn in petroleum levy in first quarter of the current fiscal year for which it has set Rs610bn annual target.

Also, the government paid about Rs74bn in various subsidies in first quarter of current fiscal or 0.1pc of GDP when compared to Rs2.8bn in last fiscal year.

Published in Dawn, November 10th, 2021