Heightening budget woes: State Bank unwilling to project higher profits

Disbursements from US under Coalition Support Fund are set to fall.

ISLAMABAD:

As disbursements from the US under the Coalition Support Fund are likely to fall from the next fiscal year, the State Bank of Pakistan and Pakistan Telecommunication Authority are reluctant to project hefty profits, heightening the woes of budget makers.

With the presentation of next year’s budget looming, the SBP and the PTA accumulatively have shown about Rs150 billion less in earnings than what the finance ministry is targeting for the fiscal year 2013-2014.

The central bank’s profits are largely generated from money lent to the federal government and export refinancing operations, while the PTA’s earnings are derived on account of auctioning third generation spectrum licences.

These heads are expected to be the largest non-tax revenue generators for the next fiscal year, commencing from July 1. The reluctance of SBP and the PTA comes at a time when authorities are anticipating a significant reduction in CSF disbursements by the US.

Authorities are thus struggling to finalise the overall non-tax revenue target after facing problems in working out the tax revenue target. Tentatively, all signs suggest the non-tax revenue to be around Rs690 billion.



As against this year’s disbursements of $1.84 billion under the CSF, for the next fiscal year, authorities are considering a projected $600 million. A major reason behind this significant reduction is the pullout of US and Nato troops from Afghanistan in 2014 and a change in the calculation method of the CSF, billed by the Pakistani military. Sources said after the change, quarterly receipts are likely to remain in the range of $100 million and $150 million.

Confusion prevails over the estimated income of the SBP as the finance ministry is hoping for around Rs225 billion to Rs240 billion for the next fiscal. For the current year, the estimated income from the central bank was Rs200 billion and during the first nine months it generated Rs150 billion, according to the ministry.

However, for 2013-2014, it is reluctant to commit more than Rs135 billion in profits, sources added. Anticipating a reduction in the discount rate, quarterly zero borrowings and exchange rate fluctuations, SBP officials were not willing to project hefty profits for the next year.

The finance ministry was of the view that without any additional borrowings, the net profit for SBP on existing stocks should not be less than Rs175 billion.

On the other hand, the ministry has also asked PTA to give fresh estimates of earnings from the auction of 3G licenses. For the last two years, the government was showing an estimated income of $800 million but it now wants to show figures over $1.2 billion to $1.3 billion.

Published in The Express Tribune, May 29^th, 2013.