Fiscal position to remain on track to meet the annual fiscal targets: MoF

March 3, 2021 (MLN): The Finance Ministry on Monday, informed that encouraging fiscal indicators, considerable growth in net revenues, and effective expenditure control measures have helped contain the overall fiscal deficit to 2.5% of the GDP during 1HFY21. While the overall fiscal deficit for FY21 was projected at 7% of GDP.

In the mid-year budget review report for the fiscal year 2020-21 placed before the National Assembly, the Finance Ministry has said that the overall Mid-Year Fiscal indicators have shown encouraging results, Primary surplus at 0.7% of GDP has been achieved.

“The fiscal consolidation measures taken by the government have resulted in financial discipline, higher revenues, and controlled expenditures. The same strategy will be followed during the remaining period of the current FY to achieve fiscal sustainability,” the report cited.

According to the report, on the Revenue side, FBR tax collection grew by 5.6% during the 1HFY21 on YoY basis. Despite an upsurge of Covid-19, FBR has been able to collect about 99% of the fixed targets for the mid-year. While Non-tax revenue remained at par with the previous year's collection during the same period in spite of the reduction in SBP profits and non-realization of fees from cellular license renewals.

The major sources of Non-tax revenue for the Federal Government during the period were the surplus profit of the SBP and Petroleum Levy. The latter has shown a growth of 110.4%.

On the Expenditure front, the report noted that Current expenditure was controlled through austerity measures and strict financial discipline. However, Covid-related expenditures were made to provide relief and mitigate the impact of the pandemic. Nevertheless, the increase in the federal net revenue and containment of expenditure limited the federal deficit to 3.1% of GDP. Similarly, the current account balance continued to improve, posting a surplus of USD 1.1 billion (0.8% of the GDP) during the first half of the current FY.

Government borrowing operations remained quite successful and in line with the Medium-Term Debt Management Strategy (MTDS FY20 — FY23). Just as in the case of last year, domestic borrowing came entirely from the financial markets, and no borrowing was made from SBP. In fact, an amount of Rs. 285 billion was repaid to SBP during the first half of the ongoing fiscal year. Furthermore, all borrowing needed to finance the fiscal deficit was made through longer-term debt, while short-term debt (T-bills) reduced by around Rs. 579 billion during this period, the report said.

Going forward, the fiscal position would depend on the domestic and international evolution of Covid. On the other hand, a faster than anticipated economic revival is likely to increase demand for inputs, the report stated.

It further stated that Finance Division has adopted the facilitative policy of release of funds to meet the expenditures, both re-current, and development, in accordance with the government spending priorities. Nevertheless, the half-year fiscal position indicates that it will remain on track to meet the annual fiscal targets.

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