Pakistan’s budget deficit shrinks to 7.1% in FY21

Pakistan’s budget deficit shrinks to 7.1% in FY21

KARACHI: Pakistan’s budget deficit for the fiscal year 2020/2021 has come down to 7.1 per cent of the GDP when compared with 8.1 per cent in the preceding fiscal year.

However, the primary deficit during the period at Rs 654 billion (1.4 per cent of GDP in FY21) fares better compared to a primary deficit of Rs 757 billion witnessed last year (1.8 per cent of GDP).

Primarily, total revenue growth at 10.1 per cent in FY21 to Rs 6.90 trillion (FY20: Rs 6.27 trillion) aided the fiscal balance, translating into 14.5 per cent of GDP vs. 15 per cent last year.

The total tax revenue collection has gone up by 11.1 per cent YoY to Rs 5.27 trillion. Indirect taxes (+22.6 per cent YoY to Rs 3.03 trillion) mainly on the back of sales tax (+24.6 per cent YoY to Rs 1.99 trillion), and direct taxes (+13.6 per cent YoY to Rs 1.73 trillion amid higher number of taxpayers), contributed to the overall collection.

In addition, the government collected Rs 1.63 trillion in non-tax revenues, displaying a jump of 7 per cent YoY.

This was particularly owed to imposition of Petroleum Levy, which is now classified under non-tax revenue (+45 per cent YoY | Rs 425 billion), according to analysts at Arif Habib Limited.

On the flipside, the surplus profit of State Bank of Pakistan and Pakistan Telecommunication Authority declined during FY21 to Rs 651 billion (-30 per cent YoY) and Rs 39 billion (-70 per cent YoY), respectively.

In addition, total expenditures went up by 6.8 per cent YoY to Rs 10.3 trillion (21.6 per cent of GDP against. 23.1 per cent of GDP in FY20).

Further breakup revealed that current expenditure underwent an uptick of 6.5 per cent YoY of which markup payments rose by 5 per cent YoY. Moreover, the defence expenses went up by 8.5 per cent YoY to Rs 1.31 trillion. Moreover, development expenditure and net lending undertaken by the government increased by 9 per cent YoY to Rs 1.31 trillion.

Total PSDP expenditure in FY21 arrived at Rs 1.21 trillion (+11 per cent YoY) with provincial expenditure at Rs 770 billion, outdoing federal disbursement of Rs 441 billion.

Pertinently, budget deficit during 4QFY21 settled at Rs 1.75 trillion (3.5 per cent of GDP), depicting a increase of 3.6 per cent YoY vis-à-vis Rs 1.69 trillion during 4QFY20.

Total revenues of the government in 4QFY21 arrived at Rs 1.91 trillion (3.5 per cent of GDP), up by 21 per cent YoY from Rs 1.58 trillion during 4QFY20.

FBR taxes increased by 44 per cent YoY to Rs 1.37 trillion due to 28.4 per cent YoY rise in direct taxes to Rs 485 billion in 4QFY21 whereas collection from sales tax and indirect taxes went up by 62 per cent and 54 per cent YoY to Rs 574 billion and Rs 884 billion, respectively.

Total expenditure in 4QFY21 clocked in at Rs 3.66 trillion (7 per cent of GDP), up 12 per cent YoY over the same period of last year (Rs 3.27 trillion; 7.8 per cent of GDP) with a 30 per cent rise in defense expenditure to Rs 532 billion while current expenditure declined by 13 per cent YoY to Rs 646 billion.

The deficit in the FY21 was financed by borrowing 60 per cent of the total deficit domestically, which amounts to Rs 2.07 trillion (17 per cent YoY | FY20 Rs 2.48 trillion) while remaining 40 per cent, Rs 1.33 trillion was raised through external sources (49 per cent YoY| FY20 Rs 896 billion).

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