Pakistan’s budget deficit is projected to touch an all-time high of Rs. 2.39 trillion during the ongoing fiscal year 2018-19.
It is expected to increase despite the government introducing mini-budgets and massively slashing the development budget.
According to a report in an English daily, the budget deficit is expected to widen to Rs. 2.39 trillion in the current financial year, which would be equal to 6.3 percent of the gross domestic product (GDP). This would be the highest ever deficit recorded thus far, exceeding the previous level of Rs. 2.24 trillion.
According to the data, the gross revenue receipts are estimated at Rs. 5.57 trillion in the year 2018-19. The breakup of Rs. 5.57 trillion revenue showed that the Federal Board of Revenue (FBR) would collect Rs. 4.4 trillion while other revenues are projected at Rs. 1.15 trillion during the ongoing fiscal year. Under the 7th NFC award, the federal government would have to transfer Rs. 2.58 trillion to the four provinces.
The report stated that the net revenue receipts left with the federal government would be Rs. 2.99 trillion after transferring funds to provinces. The government has planned to further cut the Public Sector Development Programme (PSDP) by Rs. 100 billion during the current financial year.
Moreover, the country’s expenditures are projected at Rs. 5.38 trillion for the ongoing fiscal year. In expenditures, the current expenditures are estimated at Rs. 4.8 trillion and development budget is at Rs. 575 billion said the report.
The government has also estimated that interest payments would cost Rs. 1.95 trillion. Similarly, the defense expenditures are projected at Rs. 1.68 trillion including expenditures of defense services, pensions, SPD and special packages during the period under review
According to the sources, the Rupee devaluation and a massive gap in tax collection are resulting in a higher budget deficit. The ministry of finance had revised the interest payment on foreign loans to Rs. 1.95 trillion for the year 2018-19.
As for the budget for the current fiscal year, the government had earmarked Rs. 1.62 trillion for interest payments for the current fiscal year. However, the government would have to pay an additional Rs. 330 billion on interest payment all thanks to Rupee’s depreciation.
Previously, in January 2019, Fitch Solutions said that it projects Pakistan’s budget deficit to be 6% in the current financial year 2018-19, compared to 5.8% in the previous FY2017-18.
The government will probably have to slash its expenditures over the forthcoming months as it focuses on obtaining funding from the International Monetary Fund (IMF) under the bailout programme due to weak revenue growth, said the research agency.
It warned that the widening current accounting deficit, weakening currency and sliding foreign exchange reserves indicate that the current fiscal trend, where expenditures outmatch revenue growth, is unsustainable.
FBR’s provisional collection stands at Rs. 2,060 billion against the desired target of Rs. 2,251 billion for the first seven months (July-January) period, indicating a shortfall of Rs. 191 billion.
The Federal Board of Revenue (FBR) has requested the government to lower the tax collection target. The government had set an Rs. 4,398 billion tax collection target for the current fiscal year.
However, the FBR is struggling to achieve the target despite announcing two supplementary finance bills in the last five months.