Islamabad, June 8, 2023: Pakistan is set to achieve a significant reduction in its budget deficit for the fiscal year 2022-23, thanks to focused fiscal consolidation efforts, as revealed by the Pakistan Economic Survey 2022-23 on Thursday.
The government’s commitment to ensuring fiscal sustainability and macroeconomic stability has been a driving force behind these efforts.
The survey highlights two major challenges that need to be addressed. The first is providing support to vulnerable segments of society, while the second involves managing expenditures on rising interest payments.
To tackle these challenges, the budget for the outgoing fiscal year outlined a strategy for fiscal consolidation, which involved curbing unnecessary spending and enhancing tax revenues. These measures have proven effective in containing the fiscal deficit to 3.6 percent of GDP during the first three quarters of FY2023, compared to 3.9 percent of GDP recorded in the same period last year.
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Additionally, the primary balance posted a surplus of Rs 503.8 billion (0.6 percent of GDP) during July-March FY2023, in contrast to a deficit of Rs 447.2 billion (-0.7 percent of GDP) last year. This positive shift was primarily attributed to a slowdown in the growth of non-markup expenditures.
Total revenues experienced an 18.1 percent increase in July-March FY2023, surpassing the growth rate of 17.7 percent observed in the corresponding period last year. Both tax and non-tax collections contributed to this overall revenue growth.
Tax revenues (federal and provincial) witnessed a 16.5 percent increase, largely driven by a significant rise in tax collection by the Federal Board of Revenue (FBR), despite economic challenges at the domestic and global levels. Non-tax revenues grew by 25.5 percent in July-March FY2023, supported by higher receipts from petroleum levy, markup (PSEs and others), royalties on oil/gas, and passport fees.
Total expenditures recorded a growth rate of 18.7 percent in July-March FY2023, a reduction from the 27.0 percent increase observed in the same period last year. Within total expenditures, current expenditures grew by 25.3 percent, primarily due to a 69.1 percent increase in markup payments, compared to a 0.7 percent increase in the same period of FY2022.
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On the other hand, non-markup current expenditures grew by 7.7 percent during July-March FY2023, showing a significant decline in subsidies and grants, which aligns with the government’s objective of fiscal consolidation.
The Federal Board of Revenue (FBR) achieved a notable 16.1 percent increase in net provisional tax collection, reaching Rs 5,637.9 billion compared to Rs 4,855.7 billion in the same period last year. Despite a challenging economic environment, this performance reflects the effective implementation of administrative and enforcement measures.
The fiscal consolidation efforts are progressing as planned and have yielded favorable results in terms of improved fiscal accounts during the first nine months of the current fiscal year. As a result, it is expected that FY2023 will witness a considerable decline in the fiscal deficit compared to the previous year.
Furthermore, the government’s focus on enhancing financial planning through Public Financial Management (PFM) reforms will provide additional momentum in its ongoing efforts to further reduce the fiscal deficit in the medium term.
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