The government has not only overspent on non-development expenditure at the cost of development expenditure in the current financial year, it will also miss the revenue targets, causing the budget deficit to swell by 18 per cent, reveal official documents.
Increased non-productive spending has taken a toll on education and health sector allocations, besides undermining infrastructure spending.
Non-development expenditures soared by 15.5 per cent over the budgeted limit, forcing the government to axe the development spending by almost an equivalent amount, according to revised estimates.
The massive surge in non-development spending was caused by an increase in expenditures on debt servicing and defence affairs.
The revised budget would be tabled for the approval of the National Economic Council, likely to meet on May 28.
According to a senior finance ministry official the revised numbers are merely indicative and the actual expenditures would only be known after the financial year is out.
On revenue side, the documents state, the government is going to miss the revenue target due to a 15.5 per cent shortfall in non-tax revenues.
Meanwhile, a rise of 1.18 per cent over the budgeted tax revenue shown in revised budget numbers seems improbable, given that not only is the Federal Board of Revenue (FBR) facing massive shortfall in tax collection, the government is also facing a shortfall in petroleum levy collections.
The FBR was projected to collect about 90 per cent of tax revenues, while the federal and provincial governments were projected to take in the remaining amount.
Against the total projected revenues of Rs2,574 billion, the revised total revenues have been put at Rs2,485 billion – a shortfall of Rs90 billion which is expected to widen significantly. The wide difference between projected, revised and actual expenditure also underscores the ill-planning in the process of budget formulation.
Sources said the finance ministry’s ill-preparedness led to an embarrassing situation during recent talks with the International Monetary Fund (IMF) where the FBR gave a presentation on next year’s proposed tax measures.
When the IMF Mission Chief for Pakistan Adnan Mazarei asked about the revenue impact of the proposed tax measures, “the entire team was mum”, sources added.
The revised estimates conclude that the deficit target of Rs685 billion will rise by roughly 18 per cent to Rs811 billion. More realistic estimates show, however, that the actual budget deficit may be close to Rs1,060 billion.
Published in The Express Tribune, May 25th, 2011.
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ