By Abdul Wajid Khan ISLAMABAD, May 23 (INP-WealthPK): A noted economist has warned that Pakistan’s mounting fiscal deficit is posing serious financing challenges for the government and will further increase inflation in future, reports WealthPK. In a statement, former federal finance secretary Dr. Waqar Masood said the current trends indicate that at the end of the ongoing financial year 2021-22, the nominal fiscal deficit would be around Rs5,440 billion which would be Rs2,000 billion above the budgeted level and much higher than the IMF’s revised projection of Rs3,761 billion at the time of 6^th Review. He said fiscal policy was at the core of economic stability and with such a high fiscal deficit, it was inevitable to see a rising current account deficit (CAD) which in turn posed financing challenges, as foreign reserves had come under huge pressure falling to $10.4 billion. More importantly, Pakistan should brace for higher inflation in near future. With so much over-spending, money supply would be in excess and translate into higher prices even without imported inflation. Highlighting the risks which are impacting on the country’s fiscal position, he said the size of subsidies was clearly out of line with the budgeted target of Rs682 billion for the ongoing financial year. In the first nine months, under different heads of subsidies, an expenditure of Rs575 billion has been recorded which is 84% of the budget. He said provision of subsidy to the export sector for LNG will cost around Rs500 billion. The 7% interest rate which was the basis for working out interest on domestic debt has risen since September last year and now stands at 12.25%. For greater part of the fiscal year, the interest rate was above 7%, the policy rate which was reached in June 21. One percent increase in average interest rate would contribute Rs250 billion in debt service and thus lead to overrun in expenditure. Dr. Waqar Masood said Prime Minister’s Relief Package announced by the previous government will also have a major impact on the fiscal outcome and its cost may increase to Rs750 billion. So, these trends show that the fiscal outcome would be significantly off the budget target. In its latest report on Pakistan’s fiscal operations, the Ministry of Finance stated that the country’s fiscal deficit was recorded at Rs2,565 billion during the July-March period of the ongoing fiscal year (FY22), which was equivalent to 4% of the gross domestic product (GDP). The total revenue during the first three-quarters of the current fiscal was recorded at Rs5,874 billion, of which total tax revenue stood at Rs4,821 billion, including federal tax collection of Rs4,383 billion and provincial tax collection of Rs438 billion. The total non-tax revenue was recorded at Rs1,052 billion, including federal non-tax revenue of Rs958 billion and provincial non-tax revenue of Rs93 billion. The primary balance during this period remained negative at Rs447 billion. The total expenditure during the first nine months of the current fiscal was recorded at Rs8,439 billion, of which current expenditure stood at Rs7,378 billion, including markup payments of Rs2,118 billion and defence expenditure of Rs881 billion. In percentage terms, the total revenue was recorded at 9.2% while tax collection was 7.5% of GDP during the period under review. The total expenditure during the same period stood at 13.2%, the budget deficit at 4%, and the primary deficit was recorded at 0.7% of GDP. The total development expenditure during this period was recorded at Rs1,032 billion, of which the federal share stood at Rs308 billion while the provincial share remained at Rs724 billion. The report further highlighted that the total federal tax revenue of Rs4,383 billion included Rs1,578 billion indirect taxes, Rs1,866 billion in sales tax, Rs224 billion in Federal Excise Duty (FED) and Rs714 billion in taxes received from global trade. The provincial tax revenue of Rs438 billion included Rs251.5 billion sales tax on services, Rs50 billion stamp duty, Rs27 billion motor vehicle duty, Rs6.7 billion excise duty and other taxes of Rs102.4 billion.