Amir Khan

The Finance Division's recent consolidated fiscal position report for July-December 2023-24 showcased a concerning trend in Pakistan's economic landscape. Despite a provincial surplus exceeding Rs289 billion, the budget deficit for the first six months of the fiscal year surged to 2.3% of GDP or Rs2,407 billion. The total expenditure during this period reached Rs9,261 billion, surpassing the total revenue of Rs6,853 billion. This created a deficit of Rs2,697 billion, partially mitigated to Rs2,407 billion due to the provincial surplus of Rs289.414 billion. To bridge this budget deficit, the government resorted to external borrowing of Rs608.381 billion and domestic borrowing of Rs1,799 billion. The domestic borrowing included non-bank borrowing of Rs251.611 billion and bank borrowing of Rs2,050 billion. During this period, the primary balance was 1.7% of GDP, amounting to Rs1,812 billion.

The breakdown of current expenditure – a total of Rs8,564 billion – revealed mark-up payments of Rs4,219 billion, with domestic payments amounting to Rs3,717 billion and foreign payments of Rs502.158 billion. Notable expenditures included Rs757.602 billion for defence affairs and services, Rs404.422 billion for pensions, Rs302.443 billion for running the civil government, Rs375.262 billion for subsidies, and Rs469.488 billion for grants to others. In terms of development expenditure, the Public Sector Development Programme (PSDP) saw Rs673.216 billion allocated during the first six months. This included federal spending of Rs130.408 billion and provincial spending of Rs542.808 billion. Meanwhile, net lending to Public Sector Enterprises (PSEs) reflected a negative value of Rs12,002 billion, and a statistical discrepancy of Rs35.918 billion was noted. Revenue mobilisation for the period amounted to Rs6,853 billion, with Rs4,834 billion from tax revenue and Rs2,019 billion from non-tax revenue.

The Federal Board of Revenue contributed Rs4,469 billion to tax revenue, while the provincial share stood at Rs365.065 billion. Direct taxes constituted Rs2,148 billion, and indirect taxes amounted to Rs2,320 billion. Within indirect taxes, customs duties reached Rs540.504 billion, sales tax Rs1,515 billion, and federal excise duty amounted to Rs264.580 billion. The provincial share in tax revenue included the sales tax on services (Rs230.025 billion), excise duty (Rs5.952 billion), stamp duties (Rs30.346 billion), motor vehicles tax (Rs16.017 billion) and others (Rs 82.725 billion). Out of the gross revenue receipts of Rs6,448 billion, provinces received transfers of Rs2,435 billion during the first six months of the ongoing fiscal year. This intricate financial landscape calls for scrutiny and strategic measures to address the widening budget deficit.

Credit: INP-WealthPk