First quarter: Government breaks ceiling as expenses rise Rs100b
Debt servicing, repayment account for half of expenditures in three months.
ISLAMABAD:
The federal government breached the quarterly ceiling on expenditures and spent about Rs100 billion more than the target in the first three months of the current fiscal year as interest payments and contingency liabilities rose past budgetary allocations.
Provisional estimates suggest that the federal budget deficit – the gap between income and expenses – would be around Rs450 billion for July to September of fiscal year 2014-15 on the back of higher spending on debt and security, according to sources in the Ministry of Finance.
The deficit constitutes 1.6% of the country’s gross domestic product (GDP). The National Assembly has set the federal budget deficit target at 5.9% while the overall gap including provincial savings is estimated at 4.9%.
Compared to the federal expenses of Rs925 billon, net revenue receipts in the first three months were only Rs473 billion, said the sources. Of the total expenditures, recurring expenses were Rs861.4 billion or one-fourth of the annual ceiling against the limit of one-fifth.
Contrary to that, the federal development spending, which should have been Rs105 billion or one-fifth of the annual budget, was squeezed to only Rs63 billion or less than one-tenth of the budget. This will have a direct bearing on the annual economic growth rate.
The expenses of Rs925 billion were about 23% of annual federal expenditures approved by the National Assembly. According to the budgetary instructions, the government can spend 20% of annual expenses in the first three months – a limit that was crossed as expenditures rose about Rs100 billion.
However, a senior official of the Ministry of Finance insisted that the government could make relaxation in the limit in unforeseen circumstances. For the government, he said, the overall annual budget deficit target of 4.9%, including calculations of the provinces, was more important.
Against the overall budget deficit ceiling of 1.3% of GDP or Rs376 billion for the quarter, the deficit stood around 1.2% or less than Rs350 billion, said the official.
From July to September, the federal government provided Rs311 billion to provinces as their share in taxes, of which the provinces saved around Rs100 billion that kept the deficit within the limit suggested by the International Monetary Fund (IMF).
The provisional budgetary expenditures are slightly revised when the Centre receives reconciled statements.
Expenditures
Domestic debt servicing accounted for the single biggest expense, which ate up Rs376 billion in just three months, which was almost one-third of the annual allocation for debt servicing and 40% of total expenditures in the quarter.
Apart from that, Rs19 billion was spent on foreign debt servicing and another Rs82 billion was utilised to retire foreign loans, according to the sources. Cumulative debt expenses in the quarter were Rs475 billion or more than half of total expenditures in the period.
From July to September, defence spending stood at Rs165 billion and payments made to the armed forces under contingency liabilities were in addition to this spending, said the sources.
Revenues
Though the expenses were breaching the quarterly ceilings, the revenues fell short of the target. Gross revenue receipts, including money transfer to provinces, stood at Rs785 billion or one-fifth of annual estimates. The Federal Board of Revenue’s tax revenues were Rs535 billion while non-tax revenues were Rs250 billion.
The State Bank of Pakistan deposited its Rs67 billion profit with the federal government while receipts under the Coalition Support Fund from the United States amounted to Rs77 billion.
Published in The Express Tribune, October 24th, 2014.
The federal government breached the quarterly ceiling on expenditures and spent about Rs100 billion more than the target in the first three months of the current fiscal year as interest payments and contingency liabilities rose past budgetary allocations.
Provisional estimates suggest that the federal budget deficit – the gap between income and expenses – would be around Rs450 billion for July to September of fiscal year 2014-15 on the back of higher spending on debt and security, according to sources in the Ministry of Finance.
The deficit constitutes 1.6% of the country’s gross domestic product (GDP). The National Assembly has set the federal budget deficit target at 5.9% while the overall gap including provincial savings is estimated at 4.9%.
Compared to the federal expenses of Rs925 billon, net revenue receipts in the first three months were only Rs473 billion, said the sources. Of the total expenditures, recurring expenses were Rs861.4 billion or one-fourth of the annual ceiling against the limit of one-fifth.
Contrary to that, the federal development spending, which should have been Rs105 billion or one-fifth of the annual budget, was squeezed to only Rs63 billion or less than one-tenth of the budget. This will have a direct bearing on the annual economic growth rate.
The expenses of Rs925 billion were about 23% of annual federal expenditures approved by the National Assembly. According to the budgetary instructions, the government can spend 20% of annual expenses in the first three months – a limit that was crossed as expenditures rose about Rs100 billion.
However, a senior official of the Ministry of Finance insisted that the government could make relaxation in the limit in unforeseen circumstances. For the government, he said, the overall annual budget deficit target of 4.9%, including calculations of the provinces, was more important.
Against the overall budget deficit ceiling of 1.3% of GDP or Rs376 billion for the quarter, the deficit stood around 1.2% or less than Rs350 billion, said the official.
From July to September, the federal government provided Rs311 billion to provinces as their share in taxes, of which the provinces saved around Rs100 billion that kept the deficit within the limit suggested by the International Monetary Fund (IMF).
The provisional budgetary expenditures are slightly revised when the Centre receives reconciled statements.
Expenditures
Domestic debt servicing accounted for the single biggest expense, which ate up Rs376 billion in just three months, which was almost one-third of the annual allocation for debt servicing and 40% of total expenditures in the quarter.
Apart from that, Rs19 billion was spent on foreign debt servicing and another Rs82 billion was utilised to retire foreign loans, according to the sources. Cumulative debt expenses in the quarter were Rs475 billion or more than half of total expenditures in the period.
From July to September, defence spending stood at Rs165 billion and payments made to the armed forces under contingency liabilities were in addition to this spending, said the sources.
Revenues
Though the expenses were breaching the quarterly ceilings, the revenues fell short of the target. Gross revenue receipts, including money transfer to provinces, stood at Rs785 billion or one-fifth of annual estimates. The Federal Board of Revenue’s tax revenues were Rs535 billion while non-tax revenues were Rs250 billion.
The State Bank of Pakistan deposited its Rs67 billion profit with the federal government while receipts under the Coalition Support Fund from the United States amounted to Rs77 billion.
Published in The Express Tribune, October 24th, 2014.