• Record interest rates push SBP’s profit up by 160pc to Rs972bn
• Petroleum levy collection jumps 76pc to Rs1.019tr

ISLAMABAD: A last-minute massive cut in development expenditure and heavy windfalls from petroleum levy and central bank profits helped the government contain fiscal deficit at 6.8 per cent of GDP, according to the Fiscal Operations report for 2023-24 released by the Ministry of Finance on Tuesday.

The fiscal deficit, amounting to Rs7.2 trillion in absolute terms, was slightly above the budget target of 6.5pc. Strangely though, the government earlier reported the overall fiscal deficit for FY24 at 7.4pc of GDP when it announced the current year’s budget on June 12. The overall deficit amounted to 7.7pc of GDP or Rs6.5tr in FY23.

However, the government was able to report about Rs953bn (0.9pc of GDP) surplus in the primary account — the gap between total income and expenditure excluding interest payments — against the budget target of 0.38pc of GDP, which was later revised to 0.4pc.

The data showed that the Public Sector Development Prog­ramme was slashed by 33pc to just Rs635bn at the close of the year against Rs950bn allocation and was even lower than previous year’s Rs652bn expenditure on federal development schemes.

The provincial governments also failed to honour their commitment to provide a Rs600bn cash surplus to the Centre and instead spared only Rs518bn. The federal government had claimed Rs539bn surplus receipts from provinces last month.

The major contribution in containing the fiscal deficit came from an almost 160pc increase in State Bank’s profits earned on acc­ount of record interest rates exce­eding 22pc. The central bank profits stood at Rs972bn in FY24 compared to Rs371bn a year earlier.

Another windfall came in the shape of Rs1.019tr from petroleum levy, almost 76pc higher than the previous year’s Rs580bn. However, the government had claimed to have collected only Rs960bn as part of the current year’s budget. The budget target for petroleum was originally set at Rs859bn.

Yet another 145pc increase was reported on account of Rs355bn markup recovered from public sector enterprises during the previous fiscal year compared to Rs145bn in FY23. Put together, the non-tax revenue during FY24 jumped 75.5pc to Rs3.183tr from Rs1.814tr a year earlier.

The data revealed around 37pc increase in total revenue to Rs13.3tr in FY24 against Rs9.63tr a year earlier. Tax revenue, however, increased by 29pc to Rs10.09tr while FBR’s revenue collection rose 30pc to Rs9.31tr.

Overall, the federal tax collection increased by 30pc to Rs9.3tr, while provincial taxes amounted to Rs774bn, up 19pc.

On the other hand, total expen­diture grew 27pc to Rs20.48tr. Of this, current expenditure rose by 28.5pc to Rs18.570tr. The major dent came from a massive 43pc increase in interest payments, which stood at Rs8.16tr during FY2023-24 against Rs5.69tr in the preceding year.

The increase in revenue collection showed improvement in the tax-to-GDP ratio. Total tax revenue increased to 12.5pc of GDP last year from 11.4pc a year ago, while tax revenue inched up to 9.5pc of GDP from 9.2pc. Non-tax revenue increased to 3pc of GDP in the fiscal year 2023-24 compared to 2.1pc earlier.

Total expenditure also kept up the pace and increased to 19.3pc of GDP in FY24 from 19.1pc earlier, but the major contribution from markup payments was evident at 7.7pc of GDP compared to 6.7pc in the preceding year.

Defence spending at Rs1.858tr, though significantly higher in absolute terms, dropped to 1.8pc of GDP in FY24 from 1.9pc a year earlier.

Another positive aspect of the just-concluded fiscal year was an improvement in the share of direct taxes, which stood at 4.3pc of GDP by the end of June 2024 compared to 3.9pc a year ago.

The sales tax share dropped to 2.9pc of GDP from 3.1pc. Tax recovery from international trade also slightly dropped to 1pc of GDP from 1.1pc.

Published in Dawn, July 31st, 2024