ISLAMABAD (Eshfak Mughal):- The budget deficit has been increased by Rs218 billion to Rs1169 billion mainly due to heavy payment of debt servicing and flood relief activities during the first five months (July-Nov) of the current fiscal year as compared to the same period of the last fiscal year.
The Finance Ministry issued Monthly Economic Update and Outlook January 2023 on Tuesday. According to the report, the budget deficit was swelled by Ra218 billion to Rs.1169 billion from Rs.951 billion during the first five months of the same period of the last fiscal year.
The report says that the budget deficit was increased main due to increase of interest payments which are increasing in domestic and foreign interest rates, as well as flood-related spending. These factors have put extensive pressure on overall government spending, said in the report.
FBR tax collection was increased by more than 17 percent, yet it has registered a shortfall of Rs 217 billion in the first half of the current fiscal year. In light of current global and domestic economic conditions, FBR facing a difficult task in meeting the full-year target, the report. According to the report.
In the absence of adequate fiscal space to mitigate the impact of various shocks on the economy, the government’s options would be to reallocate expenditures toward critical areas while improving spending efficiency and raising revenue by broadening the tax base. The government has to make the tax system more progressive, and reducing tax avoidance and evasion, mentioned in the report.
Geopolitical tension, tightening financial conditions, and rising inflation have all had a considerable negative influence on growth expectations, creating severe challenges for the global economic environment and Pakistan is no exception. The government has adopted tight fiscal and monetary policies to combat the economic problems brought on by both internal and external forces.
Currently, the government is facing the difficult task of supporting vulnerable segments of society and meeting other public spending needs, in particular, rising interest servicing. However, due to prudent spending management and effective domestic resource mobilization, the fiscal deficit was not only confined to the same level of 1.4 percent of GDP as last year but the primary balance surplus was also maintained during the first five months.
The federal government collected Rs.822 billion through non-tax revenue during the first five months of the current fiscal year as compared to Rs519 billion in the same months of the last fiscal year, the report said.
The Planning Commission has issued Rs130 billion for the Public Sector Development Program (PSDP) during the five months of the current fiscal year as compared to Rs.252 billion during the same period of the last fiscal year. The data shows that the government spending on development projects remains slow down due to financial crunch.
The banking sector has disbursed Rs.842 billion agriculture credit to the farmers which is 31 percent higher from the same last fiscal year. The private credit loan was squeezed to Rs.703 billion during the first half of the current fiscal year as compared to Rs.1043 billion in the same fiscal year.
The inflation rate was increased during the first half of the current fiscal year. The report says that that CPI based inflation was increased from 9.8 percent to 25 percent during the first half of the current fiscal year as compared to the same period of the last fiscal year. The large scale manufacturing was remained negative 3.4 percent during the first five months of the current fiscal year as compared to 7.2 percent growth during the same period of the last fiscal year.
The report says that the current account deficit was decreased by Rs60 percent to $3.7 billion from $9.1 billion during the first five months of the current fiscal year as compared to the same period of the last fiscal year.