ISLAMABAD:
An independent think tank has claimed to have found a discrepancy of Rs830 billion in the new budget. The think tank has stated that after taking into account the outstanding circular debt and shortfall in revenues, the actual budget deficit for the next fiscal year could be 7.8% of the total national output or Rs2.3 trillion.
The report, ‘An Evaluation of the Federal Budget 2014-15’, released by the Social Policy and Development Centre (SPDC) – a Karachi-based think tank, highlights the grey areas in the budget, throwing a challenge to the government’s claim of a budget deficit of 4.9% or Rs1.42 trillion.
The report terms the new budget ‘fragile’, warning that any slippages will clearly jeopardise the process of economic stabilisation. The findings of the SPDC add to other works that highlight flaws in the government’s policies but are never taken seriously by policymakers.
When contacted, Rana Assad Amin, the spokesman for Ministry of Finance replied that “our budgetary figures are robust and well thought of and we do not comment on every report”.
According to the SPDC, the government has overstated its revenues by Rs330 billion. The findings showed that against the official target of Rs2.810 trillion, the Federal Board of Revenue (FBR) may not be able to collect more than Rs2.640 trillion, leaving a shortfall of Rs170 billion or 0.6% of Gross Domestic Product (GDP).
The findings are close to the views expressed by the FBR behind closed door meetings, as FBR’s top management has informed the government that it will collect slightly over Rs2.7 trillion during the new fiscal year 2014-15, according to the sources.
The SPDC report stated that the appreciation of the rupee implies that the rupee value of imports will rise only modestly in the new fiscal, thereby affecting the growth of almost 40% of the FBR’s revenues.
Secondly, the taxation proposals may not yield as much as projected by the FBR, the report added.
It added that the sales tax Statutory Regulatory Orders that have been withdrawn, include many raw materials and intermediate goods. Revenues that accrue from these items at the import stage could be largely input tax invoiced away at the stage of domestic manufacturing, according to the SPDC.
Further, some of the new impositions of taxes will fall on very elastic tax bases like cigarettes (due to evasion) and bonus shares (companies will instead pay higher dividends or build reserves). Consequently, the additional revenue yield will be small.
On the account of non-tax revenues, the report has suggested that there will be Rs160-billion shortfall. It added that the projected defence receipts of Rs140 billion will not be fully materialised and there will be a shortfall of Rs70 billion in reimbursements of Coalition Support Fund (CSF) by the United States.
“These flows may decrease following a significant US withdrawal from Afghanistan”, said the report.
Further, the State Bank of Pakistan profits may not reach the level of Rs270 billion, as shown in the budget documents and there could be a shortfall of Rs70 billion.
Expenditures
The report has claimed that the government has understated the expenditures by Rs340 billion. The SPDC’s assessment showed that the interest payments, projected at Rs1.325 trillion are understated by Rs40 billion. It added the composition of domestic debt in 2013-14 has shifted towards relatively high cost Pakistan Investment Bonds, moving away from treasury bills.
Secondly, the interest cost on the Eurobonds alone will be about Rs16 billion.
“The budget makes no provision for the retirement of outstanding circular debt in the power sector of almost Rs300 billion,” according to the report.
It said that on top of these figures, the provincial governments, which are expected to generate cash surpluses of Rs289 billion, can throw a surplus of only Rs129 billion.
Published in The Express Tribune, July 5th, 2014.
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It is not surprising when ECNEC is without a head for the last one year...beside, PML N govt being comprised of mainly businessmen, are experts in fudging figures & was caught twice by WB during their 2 stint in the govt...this is their third stint. The day they will be removed WB will again expose them....