February 4, 2021 (MLN): Pakistan’s overall fiscal deficit in IHFY21 stood at 2.5% of GDP (Rs 1,138 trillion) against 2.3% of GDP (Rs 995 billion) in the comparable period of last year, showing an increase of Rs 143 billion or 14% YoY.
Data issued by the Ministry of Finance on fiscal operations for July-Dec FY21 showed that the government managed to keep the primary balance at 0.7% of GDP (Rs 337.23 billion) which is in line with the pre-Covid-19 International Monetary Fund’s target.
In 2QFY21, the overall budget deficit has shrunk by 8% YoY.
Government data showed all four provinces recorded a budget surplus, clocking in a cumulative surplus of Rs 255 billion during 1HFY21 compared to a cumulative surplus of Rs 322 billion in the corresponding period a year ago, down by 21% YoY. Individually, Punjab, Sindh, Balochistan, and KPK provinces recorded a budgetary surplus of Rs 146 billion, Rs 44 billion, Rs 19 billion, and Rs 45 billion as opposed to Rs 119 billion, 69 billion, 76 billion, and 58 billion respectively.
As per the data, the government plugged this deficit through domestic borrowing of 683.479 billion (60%), while external borrowing to finance the deficit amounted to Rs 454.446 billion (40%). Compared to the same period last year, the government domestic and external borrowings to aid the budget deficit were stood at Rs 513.583 billion and Rs 481.13 billion respectively.
Revenues and Expenditures
As the fiscal deficit is the difference between the expenditures and revenues of the government. During 1HFY21, total revenues and expenditures of the government as a percentage of GDP stood at 7.4% and 9.9% respectively, compared to 7.3% and 9.6% recorded in the same period last year. while in absolute terms, the total revenues amounted to Rs 3.35 trillion and the expenditures to Rs 4.489 trillion.
Tax Revenues remained largely the same as the last year at Rs 2.456 trillion during July-Dec FY21. Of this, about Rs 2.2 trillion came from federal revenues and Rs 245.8 billion came from provincial. Moreover, within the tax revenues, Direct Taxes and Sales Tax and Sales Tax on Services (GST) which clocked in at Rs 830.82 billion, Rs 918 billion, and Rs 140.7 billion, jumped by 6% YoY, 7% YoY, and 28% YoY, respectively. However, Federal Excise Duty (FED) dropped slightly by 3% YoY to Rs 123.2 billion.
Non-Tax Revenues increased by 17% YoY to Rs 895.25 billion attributed to almost double increase in Petroleum Levy which is now classified as Non-Tax Revenue. Petroleum Levy during the review period amounted to Rs 275.3 billion against Rs 137.9 billion in July-Dec FY20. While the government has set a target of Rs 460 billion collections from Petroleum Levy in FY21. That said, Surplus profit from SBP dropped by 13% YoY to Rs 372.54 billion.
The total expenditure which went up by 7% YoY, further breakup revealed that current expenditure of the government came in at Rs 4 trillion compared to Rs 3.72 trillion in 1HFY20 (up by 8% YoY). This included federal expenditure of about Rs 2.76 trillion and provincial expenditure of Rs 1.267 trillion.
Within the current expenditure, the government’s Mark-up payments during the period were increased by 15% YoY to Rs 1.475 trillion or 3.23% of GDP even though interest rates have sharply come down. This can be attributed to the realization of coupon payments on PIBs sold during 1QFY21 and higher borrowing. While defense expenses were down by 8%YoY to Rs 486.58 billion (1.1% of GDP) compared to Rs 529.52 billion (1.2% of GDP).
The total development expenditure and net lending undertaken by the government during the period under review was amounted to Rs 457.86 billion, showing a slight drop of 3% YoY. This encompassed Public sector development expenditure (PSDP) of Rs 403.14 billion (down by 12% YoY) of which provinces utilized about Rs 227.65 billion, the federal utilized Rs 175.49 billion on development schemes, and Rs 10.98 billion were spent on Other development expenditures. The net lending stood at Rs 43.73 billion.
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