Pakistan’s fiscal deficit shrank by 2% YoY in 9MFY21

May 6, 2021 (MLN): Pakistan’s overall fiscal deficit in 9MFY21 stood at 3.6% of GDP (Rs1,652 billion) against 3.8% of GDP (Rs1,686bn) in the comparable period of last year, showing a decline of Rs34bn or 2% YoY.

Data issued by the Ministry of Finance on fiscal operations for July-March FY21 showed that the government managed to record a surplus in primary balance at 1% of GDP (Rs425bn) which is higher than agreed with the International Monetary Fund (IMF).

As per the data, the government plugged this deficit through domestic borrowing of Rs1,099bn (66%), while external borrowing to finance the deficit amounted to Rs562bn (34%). Compared to the same period last year, the government domestic and external borrowings to aid the budget deficit were stood at Rs1,004bn and Rs682.36bn respectively.

In 3QFY21, the overall budget deficit has shrunk notably by 26% YoY, due to 13% YoY increase in Total Revenues, while Total Expenditures largely remained unchanged. Moreover, 79% of the deficit during the quarter mentioned above was financed through Internal Financing as opposed to 60% in 1HFY21.

Government data showed all four provinces recorded a budget surplus, clocking in a cumulative surplus of Rs413bn during 9MFY21 compared to a cumulative surplus of Rs343.54bn in the corresponding period a year ago, up by 21% YoY. Individually, Punjab, Sindh, Balochistan, and KPK provinces recorded a budgetary surplus of Rs244.32bn, Rs67.445bn, Rs34.53bn, and Rs65.9bn as opposed to Rs89323bn, Rs74.95n, Rs115.9bn, and Rs63.35bn respectively.

Revenues and Expenditures

As the fiscal deficit is the difference between the expenditures and revenues of the government. During 9MFY21, total revenues and expenditures of the government as a percentage of GDP stood at 11% and 14.6% respectively, compared to 10.7% and 14.5% recorded in the same period last year. while in absolute terms, the total revenues amounted to Rs4,992bn and the expenditures to Rs6,645bn.

Tax Revenues stood at Rs3.765bn during July-Mar FY21. Of this, about Rs3,395bn came from federal revenues and Rs370.117bn came from provincial. Moreover, within the tax revenues, Direct Taxes and Sales Tax (Federal) have increased by 9% YoY and 14% YoY, respectively.

Non-Tax Revenues increased by 12% YoY to Rs1,227bn attributed to a significant increase in Petroleum Levy which is now classified as Non-Tax Revenue by 86% YoY to Rs369bn. On the flip side, the Surplus profit from SBP dropped by 22% YoY to Rs498bn.

On the expenditure front, Current Expenditures have increased by 8% YoY during 9MFY21, where Mark-up Payments were up 12% YoY even though interest rates have sharply come down. This is largely owing to the realization of coupon payments on PIBs sold during 1QFY20 and higher borrowing, a report by Topline Securities cited.

Government Expenditures (Current minus Markup and Defense) increased by 9% YoY during 9MFY21, however, Defense Expenditures have come down by 2% YoY. Development Expenditures & Net Lending also remained contained at Rs723bn, down 7% YoY.

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Posted on: 2021-05-06T17:21:00+05:00

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