Budget deficit: Provinces save the day for federation
Gap between revenue and expenditure crosses Rs276b in 90 days.
ISLAMABAD:
The provinces have saved the federation from an embarrassing predicament by generating surpluses totalling Rs81 billion, restricting the gap between total revenue and outlay to Rs276.2 billion during the first quarter of the current fiscal.
Details of income and expenditure of the federal and provincial governments show that the budget deficit has widened to Rs276.2 billion, or 1.6 per cent of the total size of the economy, between July and September.
“Had there been no savings by the provinces, the budget deficit would have been over two per cent of gross domestic product (GDP), making Pakistan’s case more complicated in the eyes of the International Monetary Fund (IMF),” said a finance ministry official.
Nonetheless, Pakistan has still missed the quarterly budget deficit target of Rs240 billion given by the IMF, by Rs36.2 billion.
In the pre-flood scenario, the donor had asked Pakistan to restrict the gap between income and expenditure to Rs685 billion, or four per cent of the GDP, during the year. However, the IMF agreed in principle to relax the target to Rs812 billion, or 4.7 per cent, in light of the devastation caused by the floods.
Punjab’s total income stood at Rs96.4 billion against spending of Rs73 billion, generating a surplus of Rs23.3 billion. Sindh too saved Rs10.9 billion.
Meanwhile, Khyber-Pakhtunkhwa (KP) managed a surplus of over Rs30 billion since it spent only Rs29.4 billion against income of Rs59.5 billion. A surplus of Rs17 billion was generated by the Balochistan government.
Total revenues of the federal and provincial governments stood at Rs400.2 billion against expenditures of Rs676.4 billion – a gap of Rs276.2 billion.
The government borrowed Rs121 billion from the State Bank of Pakistan in order to finance the budget deficit – a move many dub inflationary. Heavy government borrowing also reduces the effectiveness of the central bank’s policy of curtailing inflation by making loans expensive.
The SBP on Monday increased the discount rate – the rate at which it gives out loans to commercial banks – by 50 basis points to 14 per cent.
Loans of Rs54.3 billion were taken from commercial banks by floating treasury bills, while Rs33.7 billion were raised from saving schemes to finance the budget. Additionally, an amount of Rs56.9 billion was borrowed from the world to bridge the gap.
In three months, the government spent approximately Rs269 billion to pay interest on loans obtained earlier to finance the budget deficit – an amount almost double the federal development budget which has been cut to Rs140 billion.
The authorities spent Rs93.2 billion on defence, Rs11.9 billion on public order and safety and Rs15 billion on foreign debt servicing, show the official documents.
Published in The Express Tribune, December 1st, 2010.
The provinces have saved the federation from an embarrassing predicament by generating surpluses totalling Rs81 billion, restricting the gap between total revenue and outlay to Rs276.2 billion during the first quarter of the current fiscal.
Details of income and expenditure of the federal and provincial governments show that the budget deficit has widened to Rs276.2 billion, or 1.6 per cent of the total size of the economy, between July and September.
“Had there been no savings by the provinces, the budget deficit would have been over two per cent of gross domestic product (GDP), making Pakistan’s case more complicated in the eyes of the International Monetary Fund (IMF),” said a finance ministry official.
Nonetheless, Pakistan has still missed the quarterly budget deficit target of Rs240 billion given by the IMF, by Rs36.2 billion.
In the pre-flood scenario, the donor had asked Pakistan to restrict the gap between income and expenditure to Rs685 billion, or four per cent of the GDP, during the year. However, the IMF agreed in principle to relax the target to Rs812 billion, or 4.7 per cent, in light of the devastation caused by the floods.
Punjab’s total income stood at Rs96.4 billion against spending of Rs73 billion, generating a surplus of Rs23.3 billion. Sindh too saved Rs10.9 billion.
Meanwhile, Khyber-Pakhtunkhwa (KP) managed a surplus of over Rs30 billion since it spent only Rs29.4 billion against income of Rs59.5 billion. A surplus of Rs17 billion was generated by the Balochistan government.
Total revenues of the federal and provincial governments stood at Rs400.2 billion against expenditures of Rs676.4 billion – a gap of Rs276.2 billion.
The government borrowed Rs121 billion from the State Bank of Pakistan in order to finance the budget deficit – a move many dub inflationary. Heavy government borrowing also reduces the effectiveness of the central bank’s policy of curtailing inflation by making loans expensive.
The SBP on Monday increased the discount rate – the rate at which it gives out loans to commercial banks – by 50 basis points to 14 per cent.
Loans of Rs54.3 billion were taken from commercial banks by floating treasury bills, while Rs33.7 billion were raised from saving schemes to finance the budget. Additionally, an amount of Rs56.9 billion was borrowed from the world to bridge the gap.
In three months, the government spent approximately Rs269 billion to pay interest on loans obtained earlier to finance the budget deficit – an amount almost double the federal development budget which has been cut to Rs140 billion.
The authorities spent Rs93.2 billion on defence, Rs11.9 billion on public order and safety and Rs15 billion on foreign debt servicing, show the official documents.
Published in The Express Tribune, December 1st, 2010.