The federal budget deficit in the first nine months of the current fiscal year skyrocketed to nearly Rs3.2 trillion, which was higher by 53% compared to the same period of the previous year.
For the July-March period of the ongoing fiscal year, the gap between federal income and expenditure, to be precise Rs3.165 trillion, was equal to 5% of the upward revised size of the economy, according to the Fiscal Operations Summary released by the Ministry of Finance on Tuesday.
The Rs3.2 trillion budget deficit was 53% or Rs1.1 trillion higher than the same period of the last fiscal year. The annual federal budget deficit target is Rs4 trillion for the current fiscal year.
The nine-month deficit was equal to 79% of the annual target. Usually, heavy spending is made in the last quarter of every fiscal year, which suggests that the budget deficit in the current fiscal year may end up around Rs5 trillion.
Finance Minister Miftah Ismail has said that the federal budget deficit could touch Rs5.6 trillion by June, if no corrective measures were taken.
The last federal government spent Rs3 trillion on debt and defence spending during the period, which was Rs217 billion higher than its net income.
A major reason behind the surge in deficit was an uptick in the current expenditures -- mainly due to subsidies and low non-tax revenues due to the last government’s decision to cut the petroleum levy rates to keep prices in the range of the people.
Current expenditures were equal to 88% of the total federal government expenditures and 40% of them were spent only on paying interest on loans.
The federal development spending stood at Rs452 billion in the first nine months of the current fiscal year, which was higher than the comparative period of previous year, but constituted only 50% of the original annual budget of Rs900 billion.
Development spending was higher by 28% (Rs99 billion) compared to the same period of previous fiscal year, which was not in line with the annual allocation.
The gap between federal income and expenditure grew despite a healthy momentum in the FBR’s tax collection. The tax collection increased 29% to Rs4.383 trillion in the first nine months of the current fiscal year on the back of higher collections at the import stage.
Read Moderate growth and high deficit
However, the gains made by the FBR were offset by a 16% dip in non-tax revenues.
Non-tax revenue collection amounted to Rs983 billion, down Rs183 billion compared to the same period of previous year. The non-tax revenue collection was equal to only 47% of the annual target of Rs2.1 trillion.
Gross federal revenue receipts of the government increased to Rs5.4 trillion, up 18%. After paying Rs2.6 trillion to the provinces as their share in the National Finance Commission award, the net federal government’s revenues were less than Rs2.8 trillion –not enough to fully finance the debt servicing and the defense of the country.
The rest of the expenditures on running the civil government, paying subsidies, pension and for the development were met by taking new loans. The last PTI government had added on an average Rs14.6 billion per day of debt during its rule.
Total expenditures incurred by the federal government jumped to Rs5.95 trillion, double the net government revenues. There was a 28% increase in the federal government’s total expenditures compared with the same period of the last year.
Current expenditures amounted to Rs5.3 trillion, up 25% or Rs1.1 trillion, during the first nine months of the current fiscal year. Interest payments stood at Rs2.1 trillion, slightly higher than the previous year, but consumed 76% of the government’s net revenues.
The defence spending stood at Rs882 billion, up over 12%, consuming another 32% of the government’s net revenues.
The last government spent Rs575 billion on subsidies –higher by 183% over the same period of the last year and a key reason behind the record nine-month federal budget deficit of Rs3.2 trillion.
After incorporating the impact of the provincial cash surplus of Rs600 billion, the overall budget deficit was provisionally recorded at Rs2.6 trillion, or 4% of GDP.
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