Fiscal Deficit at 6.5%: Pakistan Economic Survey 2023-24

Fiscal Deficit at 6.5%: Pakistan Economic Survey 2023-24 – The Pakistan Economic Survey 2023-24, released on Tuesday, estimated the fiscal deficit for the outgoing fiscal year at 6.5 percent, marking a decrease from the previous year’s deficit of 7.8 percent.

The survey highlights the ongoing struggle of Pakistan’s fiscal policy to manage high deficits and debt, exacerbated by global and domestic challenges over the past two years.

The economic survey stated that fiscal policy in Pakistan continues to grapple with persistently high fiscal deficits and debt due to unprecedented expenditures and moderate revenue growth. These challenges have been compounded by rising flood-related expenditures, a global economic slowdown, geopolitical tensions, supply chain disruptions, high inflationary pressures, higher interest payments, import compression, and contraction in industrial activities.

These factors have created numerous challenges for the already struggling economy, particularly in terms of fiscal sustainability. To address these challenges, fiscal consolidation efforts were implemented in line with the budget for 2023-24. These efforts have contributed to improving revenues; however, significant challenges remain due to mounting expenditure pressures, primarily driven by higher markup payments.

During July-March FY 2024, the fiscal deficit was recorded at 3.7 percent of GDP, the same as last year. Meanwhile, the primary balance posted a surplus of Rs 1,615.4 billion (1.5 percent of GDP) during this period, compared to a surplus of Rs 503.8 billion (0.6 percent of GDP) last year.

Total expenditure increased by 36.6 percent in July-March FY 2024, compared to 18.7 percent last year. Within total expenditures, current expenditures grew by 33.4 percent due to a 54 percent increase in markup payments during the first nine months of FY 2024. In contrast, prudent expenditure management strategies led to non-markup current spending growth of 20.4 percent relative to markup expenditures.

Total revenues grew by 41.0 percent in July-March FY 2024, compared to the growth of 18.1 percent observed last year. This substantial increase in revenues is primarily attributed to a sharp rise in non-tax revenues, which grew by 90.7 percent. This growth was driven by higher receipts from the State Bank of Pakistan (SBP) profit, petroleum levy, markup from Public Sector Enterprises (PSEs) and others, and royalties on oil and gas.

Total tax collection (federal and provincial) grew by 29.3 percent during July-March FY 2024, compared to 16.5 percent last year. The Federal Board of Revenue (FBR) net provisional tax collection grew by 30.6 percent to Rs 7,361.9 billion in July-April FY 2024, compared to Rs 5,637.9 billion last year. Domestic tax collection saw a 32.3 percent increase, reaching Rs 6,464.3 billion, up from Rs 4,886.1 billion last year. This improvement in tax collection was supported by various tax-enhancing measures implemented under the Finance Act 2023.

Despite significant challenges, the fiscal performance during the first nine months of FY 2024 is a testament to the government’s resolve to continue consolidation efforts to strengthen revenue mobilization and control expenditures. The government is making intensive efforts through various reforms and initiatives on both the revenue and expenditure sides. These reforms aim to reduce dependency on borrowing, mitigate debt-related risks, and create sufficient space for social assistance and development spending.

The Economic Survey 2023-24 underscores the importance of continued fiscal discipline and strategic reforms to sustain economic stability and growth in Pakistan.