August 22, 2022 (MLN): Pakistan’s overall fiscal deficit in FY22 stood at 7.9% of GDP (Rs5.3trillion) against Rs3.4tn in FY20, showing a colossal surged of around 2tr or 55% YoY, as per data reported by Finance Ministry.
This notable surge in fiscal deficit may attributed to the energy subsidies around Rs1.5tr provided by the previous government.
The government plugged this deficit through domestic borrowing of Rs4.8tr while external borrowing to finance the deficit amounted to Rs1.17tr. In the same period last year, the government domestic and external borrowings to aid the budget deficit were stood at Rs2.1tr and Rs1.3tr respectively.
In 4QFY22, the overall budget deficit stood at 3.8% of GDP compared to 3.6% of GDP in 4QFY20, with a primary deficit at 0.7% of GDP as against 1% of GDP in the same quarter last year.
Government data showed that Punjab and Sindh recorded a budget surplus in FY22, clocking in at Rs351.54bn, and Rs48.76bn. On the other hand, KPK and Balochistan suffered a deficit of Rs49.17bn, and Rs157mn, respectively.
It is pertinent to mention that all the four provinces posted cumulative budget surplus of Rs314bn during FY21 compared to a cumulative surplus of Rs77bn in FY20, up by 4x YoY.
Revenues and Expenditures
Since the fiscal deficit is the difference between the expenditures and revenues of the government, during FY22, total revenues and expenditures of the government as a percentage of GDP stood at 12% and 20% respectively, compared to 14.5% and 21.6% recorded in the same period last year. while in absolute terms, the total revenues amounted to Rs8tr and the expenditures to Rs13.2tr, respectively.
Total revenue jumped by 16% YoY during FY22 driven by 42% increase in FBR collection despite a decline of 27% in non-tax collection. FBR collection increased as direct taxes, up by 32% YoY and indirect taxes rose by 28% YoY.
Within indirect taxes, the surge was witnessed in sales tax, up by 27% YoY as economic growth accelerated, customs duty, up by 32% YoY as goods imports surged by 34% YoY and excise duty, up by 18% YoY.
During FY22, non-tax collection declined by 27% YoY on the back of 70% YoY decline in Petroleum Levy as Govt lowered rate to zero amid record high prices of MS and HSD. Whereas, SBP Profit declined by 27% YoY but PTA Profit increased by 2.6x YoY.
On the expense front, the government expenditures have soared 29% YoY during FY22. Current expenditure rose by 27% YoY on the back of higher subsidies, up 3.6x YoY.
Meanwhile, debt servicing witnessed an increase of 16% YoY on the back of higher average interest rates.
Furthermore, defense expenditure posted an increase of 7% YoY and other expenditures inclined by 13% YoY. Development spending also posted a jump of 26% YoY in FY22 as PSDP (Provincial) jumped up by 58% YoY while PSDP (Federal) declined by 9% YoY.
Zeeshan Azhar, Analyst at Foundation Securities is of the view that revenues would post modest growth in FY23 as economic growth would be below potential amid very high inflation and lower imports.
The thrust for higher revenues would come from Petroleum Levy, the imposition of which the IMF has set as condition for release of future tranches under the IMF program.
He also added that the government would find it difficult to control current expenditure amid high interest rates and being fixed in nature.
Copyright Mettis Link News
Posted on:2022-08-22T15:42:56+05:00
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