Karachi, January 29, 2024 – The Ministry of Finance in Pakistan has announced that the budget deficit for the first half of the fiscal year 2023-24 (July to December) has expanded to 2.3% of the Gross Domestic Product (GDP).
The fiscal operation report released by the ministry unveiled that the budget deficit reached Rs 2.4 trillion during this period, with the GDP standing at Rs 105.82 trillion. In comparison, the budget deficit for the same period in the previous fiscal year was 2%, equivalent to Rs 819 billion, when the GDP size was Rs 84.66 trillion.
Analysts at Topline Securities Limited noted that the International Monetary Fund (IMF) had projected a budget balance of -7.6% of GDP for the entire fiscal year.
During the first half of the fiscal year 2023-24, the government recorded a primary surplus of Rs 1.8 trillion, constituting 1.7% of the GDP. This is a notable increase from the primary surplus of Rs 0.89 trillion or 1.1% of the GDP recorded in the same period of the previous fiscal year. In the second quarter of the fiscal year 2023-24, the primary surplus stood at Rs 1.4 trillion, compared to Rs 0.75 trillion in the second quarter of the previous fiscal year. The IMF’s projection for the full fiscal year 2023-24 is a primary surplus of 0.4% of GDP.
Total revenue for the first half of the fiscal year 2023-24 reached Rs 6.9 trillion, a significant increase from Rs 4.7 trillion in the first half of the previous fiscal year, marking a 46% year-on-year growth. Concurrently, total expenditures also increased by 45% year-on-year, reaching Rs 9.3 trillion in the first half of the fiscal year 2023-24.
Tax revenue exhibited a growth of 30% year-on-year, totaling Rs 4.8 trillion in the first half of the fiscal year 2023-24. Similarly, non-tax revenue experienced a remarkable surge of 109% year-on-year, reaching Rs 2 trillion. This surge was primarily attributed to increased profits from the State Bank of Pakistan (SBP) and higher collections from the Petroleum Development Levy (PDL).
Federal government markup payments for the first half of the fiscal year 2023-24 amounted to Rs 4.2 trillion, reflecting a substantial increase of 64% year-on-year. This surge was attributed to higher interest rates and an increase in the debt stock.
The widening budget deficit raises concerns about the fiscal management of the country. The government will need to carefully consider measures to control expenditures, boost revenue, and implement policies that encourage economic growth to address these fiscal challenges. The Ministry of Finance is expected to closely monitor the situation and take necessary actions to maintain fiscal stability in the coming months.
