Fiscal accounts come under significant pressure due to COVID-19 in Q4

August 27, 2020: The country’s fiscal accounts came under significant pressure during the fourth quarter (Q4) of the financial year 2020 due to COVID-19 related expenditures, according to Monthly Economic Update and Outlook.

The overall fiscal deficit stood at 8.1 percent of GDP in FY 2020 against 9.1 percent of GDP recorded in the previous year, said a report released by the Finance Ministry.

The fiscal deficit has been contained due to the significant rise in total revenues (28 percent) that outpaced the growth in total expenditures (16 percent).

The quarter- wise breakup reveals that the fiscal deficit was 4.0 percent of GDP up to Q3, while last quarter of FY2020 alone registered the deficit at 4.1 percent of GDP, it said.

“This shows that fiscal accounts came under significant pressure during the fourth quarter of FY2020 due to COVID-19 related expenditures,” it added.

Meanwhile, the primary balance was restricted to 1.8 percent of GDP against the deficit of 3.6 percent of GDP in FY2019.

In FY 2020 under total revenues, non-tax revenues witnessed a remarkable growth of 257 percent and stood at Rs 1524.4 billion against Rs 427.3 billion in FY2019. The increase stemmed from a sharp rise in SBP profit (Rs. 935.5 billion), PTA profit (Rs 127 billion) and Rs 105.2 billion from mark up (PSEs & others)

On the expenditure side, total expenditures grew by 16 percent to Rs 9,648.5 billion in FY2020.

Out of the total, the current expenditures increased by 20.1 percent, however, it remained below the growth of 21.3 percent recorded in FY2019.

Within development expenditures, PSDP expenditures (Federal & Provincial) grew by 8.1 percent during FY2020 in contrast to a sharp decline observed in FY2019.

In absolute term, total PSDP expenditures stood at Rs 1,089.7 billion in FY2020 against Rs 1,008.2 billion in FY2019.

FBR tax collection grew by 4.7 percent to reach Rs 290.5 billion in the month of July, FY2021 against Rs 277.3 billion in the comparable period of FY2020.

A gradual pickup in economic activity and FBR’s various administrative measures helped the cause.

Encouragingly, tax collection has exceeded the target of Rs 243 billion set for the month of July, FY2021, the report added.

Domestic tax collection increased by 5.5 percent to Rs 242.6 billion in July, FY2021 against Rs 230.0 billion in the same period of FY2020. Direct taxes grew by 1.8 percent, sales tax by 3.0 percent and FED grew by 66.0 percent while customs duty increased by 1.0 percent.

APP