ISLAMABAD: As the fiscal slippages and external financing gap is constantly rising the Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel (BMP) has called for keeping check on government expenditure and high cost of debt servicing to contain budget deficit, which is projected to cross Rs4 trillion -almost 6% of the GDP in current fiscal year of 2022-23.
Expressing serious concern over the high jump in country’s budget deficit – the gap between the government’s income and its expenditures, FPCCI former president and BMP Chairman Mian Anjum Nisar said the primary deficit is now assessed to touch a deficit of 2.5 percent of GDP, equivalent to Rs2.15 trillion against the target of surplus of Rs150 billions.
Mian Anjum maintained that the failure to reform the tax system and increase revenue collection is a major factor behind heavy domestic and foreign borrowings by the government.
He claimed that the total government expenditure has increased massively during this period mainly due to high cost of debt servicing, which has jumped by more than 20 percent. The budget deficit is going up despite the government claim of tight control over expenditures, while the only main head of expenditure that remains out of control is the debt servicing cost, he said.
The government has to revise macroeconomic and fiscal framework, whereby the budget deficit and primary deficit are projected to escalate massively against the envisaged targets.
The government has envisaged a budget deficit target of 4.9 per cent of the GDP for the current fiscal year and it seems hard for restricting the budget deficit within the desired limits mainly because of difficulties in achieving the fixed revenue target and curtailing the expenditures at the twilight of the government’s tenure for completion of its tenure.
He observed that Pakistan’s fiscal deficit continued with old traditional practices as the development budget became the major victim among three major Ds on the expenditure front, including debt servicing, defence and development. The Public Sector Development Program (PSDP) could only utilize Rs0.74 trillion in the first quarter of the current fiscal year as the spending remained halted in the aftermath of severe floods.
Quoting the data, the Businessmen Panel chairman said that Pakistan’s budget deficit in absolute terms almost doubled in the first quarter by touching the figure of Rs800 billion in the current fiscal against Rs430 billion in the same period of the last financial year.
The budget deficit in the percentage of the GDP escalated sharply as it stood at 1 per cent of the GDP in the first three months of the current fiscal year despite a revenue surplus generated by the provinces to the tune of Rs215 billion against 0.5 per cent of the GDP in the same period of the last financial year.
The FPCCI former president stated that Pakistan’s fiscal policy continued to focus primarily on macroeconomic stabilization, in response to the financial crisis, instead of putting more emphasis on reforms to foster long-term growth through industrialization by adopting advanced technology. The federal government’s budget deficit stood at Rs1.02 trillion in the first quarter of the current fiscal year and the provinces generated a revenue surplus of Rs0.218 trillion, so the consolidated overall budget deficit was brought down to Rs0.808 trillion, equivalent to slightly over 1 per cent of the GDP.
It is relevant to mention here that the overall budget deficit had gone up to 7.9 per cent of the GDP for the last fiscal year when it started with a budget deficit of 0.7 per cent of the GDP in the first quarter of the last financial year. However, the primary balance stands at Rs0.145 trillion in the first quarter of the current fiscal year as Pakistan agreed with the IMF for keeping the primary balance at Rs0.153 trillion surplus for the whole financial year 2022-23. With the budget deficit standing at 1 per cent of the GDP in the first quarter, it could be easily analyzed how much the budget deficit might go up by the end of the current fiscal year, keeping in view the empirical evidence of the last financial year.
According to the fiscal operation released by the Ministry of Finance on Friday, Pakistan’s total revenues stood at Rs2.016 trillion in the first quarter of the current fiscal out of which tax revenues were Rs1.7 trillion and non-tax revenues Rs0.234 trillion. The government could hardly fetch Rs0.49 trillion in the shape of petroleum levy in the first quarter of the current fiscal year against an envisaged target of Rs0.855 trillion agreed with the IMF for the whole financial year.
Out of gross revenue receipts of Rs1.8 trillion, the provinces obtained Rs 0.88 trillion financial shares under the NFC Award so the Centre was left with net revenue receipts of only Rs0.964 trillion. The total expenditure stood at Rs1.99 trillion, so the federal government’s budget deficit escalated to Rs1.02 trillion for the first three months of the current fiscal year.