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Tag: fiscal deficit

  • Pakistan’s fiscal deficit lowers by 9.5% in first quarter

    Pakistan’s fiscal deficit lowers by 9.5% in first quarter

    KARACHI: Pakistan’s fiscal balance in the outgoing first quarter of 2021/2022 posted a deficit of PKR 438 billion, -9.5 per cent YoY lower than prior year’s deficit, according to data released by the finance ministry on Tuesday.

    In terms of per cent GDP, the deficit arrived at 0.8 per cent in 1QFY22 compared to 1.1 per cent recorded in 1QFY21 (PKR 484 billion), said analysts at Arif Habib Limited.

    However, the primary surplus during the period stood at PKR 184 billion (0.3 per cent of GDP in 1QFY22) , down 29 per cent YoY, compared to a primary surplus of PKR 258 billion witnessed same period last year (0.6 per cent of GDP).

    Primarily, total revenue growth of 22 per cent in 1QFY22 to PKR 1.8 trillion (1QFY21: PKR 1.5 trillion) aided the fiscal balance, translating into 3.4 per cent of GDP vs. 3.2 per cent same period last year.

    The total tax revenue collection was up by 37 per cent YoY to PKR 1.5 trillion. Indirect taxes (+42 per cent YoY to PKR 917 billion) mainly on the back of higher sales tax (+43 per cent YoY to PKR 264 billion), and direct taxes (+32 per cent YoY to PKR 481 billion amid higher number of tax payers), contributed to the overall collection.

    In addition, the government collected PKR 276 billion in non-tax revenues, displaying a decline of 23 per cent YoY. This was particularly owed to lower Petroleum Levy (-90 per cent YoY | PKR 13 billion). On the flipside, the surplus profit of State Bank of Pakistan and Pakistan Telecommunication Authority increased during 1QFY22 to PKR 109 billion (+4 per cent YoY) and PKR 30 billion (+269 per cent YoY), respectively.

    In addition, total expenditures went up by 14 per cent YoY to PKR 2.3 trillion (4.2 per cent of GDP vs. 4.3 per cent of GDP in 1QFY21).

    Further breakup revealed that current expenditure underwent an uptick of 9 per cent YoY of which defence rose by 17 per cent YoY.

    However, the markup expenses went down by 16 per cent YoY to PKR 623 billion. Moreover, development expenditure and net lending undertaken by the government increased by 38 per cent YoY to PKR 180 billion.

    Total PSDP expenditure in 1QFY22 arrived at PKR 262 billion (+63 per cent YoY) with provincial expenditure at PKR 154 billion (+71 per cent YoY), outdoing federal disbursement of PKR 108 billion (+53 per cent YoY).

    Pakistan’s fiscal deficit narrows in nine months
  • Pakistan’s budget deficit shrinks to 7.1% in FY21

    Pakistan’s budget deficit shrinks to 7.1% in FY21

    KARACHI – Pakistan’s fiscal performance for the fiscal year 2020/2021 has shown encouraging signs as the budget deficit has reduced to 7.1 percent of the GDP compared to 8.1 percent in the preceding fiscal year.

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  • Pakistan’s fiscal deficit narrows in nine months

    Pakistan’s fiscal deficit narrows in nine months

    ISLAMABAD: Pakistan’s fiscal deficit has narrowed to 3.6 percent of the GDP during first nine months (July – March) of the current fiscal year as compared with the deficit of 3.8 percent in the corresponding months of the last fiscal year, according to data released by the finance ministry on Thursday.

    According to commentary of Arif Habib Limited, Pakistan’s fiscal balance in the current fiscal year to date has strengthened over prior year, with the deficit arriving at Rs1.65 trillion in nine months of fiscal year 2020/2021 (3.6 percent of GDP) compared to Rs1.69 trillion in the corresponding months of the last fiscal year (3.8 percent of GDP), down by 2 percent YoY.

    Moreover, the primary surplus during the period at Rs452 billion (1.0 percent of GDP in nine months of fiscal year 2020/2021) fares better compared to a primary surplus of Rs194 billion witnessed last year (0.4 percent of GDP).

    Primarily, total revenue growth at 6 percent in nine months of fiscal year 2020/2021 to Rs5.0 trillion (nine months of the last fiscal year: Rs4.7 trillion) aided the fiscal balance, translating into 11.0 percent of GDP vs. 10.7 percent last year. The total tax revenue collection has gone up by 5 percent YoY to Rs3.8 trillion. Indirect taxes (+13 percent YoY to Rs2.15 trillion), sales tax (+14 percent YoY to Rs1.42 trillion), and direct taxes (+9 percent YoY to Rs1.25 trillion amid higher number of tax payers), contributed to the overall collection.

    In addition, the government collected Rs1.17 trillion in non-tax revenues, displaying a jump of 13 percent YoY. This was particularly owed to imposition of Petroleum Levy, which is now classified under non-tax revenue (+86 percent YoY | Rs369 billion). On the flipside, the surplus profit of State Bank of Pakistan and Pakistan Telecommunication Authority declined during nine months of fiscal year 2020/2021 to Rs498 billion (-22 percent YoY) and Rs20 billion (-82 percent YoY), respectively.

    In addition, total expenditures went up by 4 percent YoY to Rs6.6 trillion (14.6 percent of GDP vs. 14.5 percent of GDP in 9MFY20). Further breakup revealed that current expenditure underwent an uptick of 8 percent YoY of which markup payments rose by 12 percent YoY. On the contrary, the defence expenses went down by 2 percent YoY to Rs784 billion. Moreover, development expenditure and net lending undertaken by the government declined by 7.5 percent YoY to Rs723 billion.

    Total PSDP expenditure in nine months of fiscal year 2020/2021 arrived at Rs654 billion (-9 percent YoY) with provincial expenditure at Rs390 billion, outdoing federal disbursement of Rs264 billion.

    Decline of 26 percent YoY in deficit during 3QFY21

    The analysts highlighted that cumulatively all four provincial governments recorded an overall balance of Rs413 billion during nine months of fiscal year 2020/2021, compared to Rs344 billion recorded in the corresponding period last year, marking a 20 percent increase. However, Sindh and KPK recorded a decline of 10 percent YoY and 70 percent YoY, respectively.

    Pertinently, budget deficit during 3QFY21 settled at Rs514 billion (1.1 percent of GDP), depicting a decline of 26 percent YoY vis-à-vis Rs691 billion during 3QFY20.

    Total revenues of the government in 3QFY21 arrived at Rs1.64 trillion (3.6 percent of GDP), up by 13 percent YoY from Rs1.46 trillion during 3QFY20.

    FBR taxes increased by 25 percent YoY to Rs1.18 trillion due to 15 percent YoY rise in direct taxes to Rs416 billion in 3QFY21 whereas collection from sales tax and indirect taxes went up by 30 percent and 39 percent YoY to Rs498 billion and Rs769 billion, respectively.

    Total expenditure in 3QFY21 clocked in at Rs2,156 billion (4.7 percent of GDP), up 0.3 percent YoY over the same period of last year (Rs2,149 billion; 4.9 percent of GDP) with a 9 percent rise in defense expenditure to Rs297 billion and 9 percent uptick in current expenditure to Rs2.1 trillion.

  • Finance ministry hopes achieving annual fiscal targets

    Finance ministry hopes achieving annual fiscal targets

    ISLAMABAD: The finance ministry is hopeful of achieving annual fiscal targets as half year (July – December) 2020/2021 fiscal position indicates that it will remain on track in the remaining half.

    The ministry of finance on Monday issued Mid-year Budget Review Report for Fiscal Year 2020/2021. The finance division said that the fiscal consolidation measures taken by the government had resulted in financial discipline, higher revenues and controlled expenditures.

    “The same strategy will be followed during the remaining period of the current fiscal year to achieve the fiscal sustainability,” it added.

    The continuity in fiscal consolidation, stable exchange rate, improved current account and better financial management, present a promising economic outlook, the finance division said.

    It said that the borrowing operations remained quite successful and in-line with the Medium-Term Debt Management Strategy (MTDS FY20 — FY23) of the Government. Government is following the policy of zero borrowing from SBP since July 2019 and is maintaining a cash buffer with SBP for meeting the contingencies/ obligations.

    Following are the key highlights:

    Similar to last year, domestic borrowing was made entirely from the financial markets during first half of current fiscal year. No borrowing was made from SBP. In fact, an amount of Rs. 285 billion was repaid to SBP during first half of ongoing fiscal year.

    All borrowings needed to finance the fiscal deficit were made through longer-term debt while Government retired a portion of short-term debt (T-Bills) by around Rs. 579 billion during this period.

    The government introduced various new instruments during first half of the current fiscal year to further develop the government securities market, attract more diversified investor base and to provide more flexibility and options to the investors as well as to the government.

    — 3, 5 and 10-year floating rate PIBs with quarterly coupon payment frequency are being issued since October 2020.

    — the government has started issuance of 5-year Sukuk with fixed rate rental payments since July 2020.

    — The government also introduced 2-year floating rate PIBs in November 2020 with quarterly coupon payment frequency and fortnightly interest rate resetting. Existing Floating Rate PIBs carry interest rate reset of 6-month while interest rate reset in this instrument in only two weeks.

    Similar to conventional bond, the government introduced re-opening mechanism in Sukuk auctions in July 2020 to increase liquidity of the Sukuk issue and lower costs for the government.

    Considering the encouraging participation and demand from the market in the recent auctions of 15 and 20-year PIBs, the government has decided to issue 30-year PIBs with effect from January 2021.

    In order to enhance participation and competition in primary and secondary markets for government debt, the government banned all institutional investors in National Savings Schemes from July 2020; and

    Most of the external debt was raised from multilateral and bilateral sources on concessional terms (low cost and longer tenor).

  • Budget deficit widens to 2.5 percent in first half: finance ministry

    Budget deficit widens to 2.5 percent in first half: finance ministry

    ISLAMABAD: The budget deficit has widened to 2.5 percent of the GDP during first half (July – December) of the current fiscal year 2020/2021 as compared with the deficit of 2.3 percent in the corresponding half of the last fiscal year, according to statistics released by the ministry of finance on Wednesday.

    According to the details, the total revenue was at Rs3,351 billion during the first half of the current fiscal year. Meanwhile, total expenditures was at Rs4,489 billion in the same period of the current fiscal year. Therefore, budget deficit stood at Rs1,138 billion or 2.5 percent of the GDP.

    The total tax revenue was recorded at Rs2,456 billion during the first half of the current fiscal year.  Out of which the contribution of the federal government was Rs2,210 billion and the rest Rs246 billion was by the provincial governments.

    The non-tax revenue was recorded at Rs895 billion out of which federal government contributed Rs484 billion and the provincial governments share was at Rs47 billion.

    The current expenditure has increased to Rs4,029 billion out of which the government’s mark up payments against loans were at Rs1,475 billion and defence expenditures were at Rs486 billion.

    The government spent Rs458 billion on development expenditure during the first half of the current fiscal year.

    The total revenue collection to GDP ratio during first half of the current fiscal year was at 7.4 percent. The total expenditure to GDP ratio was at 9.9 percent.

  • Pakistan’s fiscal deficit narrows to 8.1 percent in FY20

    Pakistan’s fiscal deficit narrows to 8.1 percent in FY20

    KARACHI: Pakistan’s budget deficit narrowed to 8.1 percent in FY20 (2019/2020) as compared with the deficit of 8.9 percent in the preceding fiscal year, according to statistics released by the ministry of finance on Wednesday.

    Analysts Topline Securities said that as the deficit is lower than the 9.1 percent of GDP envisaged by the government owing to lower utilization of the Rs1.24 trillion COVID-19 relief package. Reportedly around Rs480 billion could not be spent during the year.

    The primary deficit for the year clocked in at 1.8 percent of GDP or Rs757 billion (last year was 3.5 percent of GDP or Rs1,354 billion).

    In 4QFY20, the fiscal deficit came in at 4.3 percent of GDP compared to 9MFY20 fiscal deficit of 3.8 percent of GDP due to implications of COVID-19 on both revenues and expenditures.

    Sindh and Baluchistan recorded a budgetary surplus during FY20, with  Punjab and KPK recording budgetary deficits during the period.

    Total Revenues increased by 28 percent YoY in FY20, where the improvement was led by 257 percent YoY higher Non-Tax Revenues which includes Rs936 billion surplus profit from SBP.

    The Tax Revenues increased by only 6 percent YoY during the year, where they declined by 12 percent YoY in 4QFY20 owing to COVID-19 outbreak. The government collected 5 percent YoY higher Direct Taxes, 9 percent YoY higher Sales Tax and 42 percent YoY higher Petroleum Levy during FY20.

    In 4QFY20, as expected due to lockdown Direct Taxes and Sales Tax were down by 16 percent YoY and 15 percent YoY, respectively while Petroleum Levy was up 47 percent YoY.

    On the expenditures front, Total Expenditure increased by 16 percent YoY in FY20. Current Expenditure increased by 20 percent YoY, where Mark-up Payments were up 25 percent YoY and Defense Expenditures were up 6 percent YoY.

    In 4QFY20, Current Expenditure is up by 55 percent QoQ and 27 percent YoY due to COVID-19 related expenses.

    The Development Expenditure remained steady (-1 percent YoY) in FY20, with 4QFY20 expenses rising by 37 percent QoQ but down 21 percent YoY.

    In spite of the decline in interest rates, government interest bill increased by 24 percent QoQ and 17 percent YoY during 4QFY20 owing to greater borrowing at higher rates and interest payment schedule.

    The analysts estimated that Pakistan’s fiscal deficit to clock in at around 8.5 percent of GDP in 2020/2021 due to continuing implications of COVID-19.

  • Fiscal deficit contracts at 3.8pc in first nine months

    Fiscal deficit contracts at 3.8pc in first nine months

    ISLAMABAD: The fiscal deficit has contracted at 3.8 percent during first nine months of current fiscal year. The budget deficit was 5 percent in the same moths of the last fiscal year.

    Analysts at Topline Securities said that importantly, the primary balance during the period clocked in at 0.4 percent of GDP or Rs194 billion (last year was -1.2 percent of GDP or -Rs463 billion), close to the initial target of 0.6 percent set by the IMF.

    IMF is likely to review these targets going forward because of the implications of COVID-19 outbreak, the analysts said.

    In the 3QFY20, the fiscal deficit came in at 1.6 percent of GDP compared to 2QFY20’s fiscal deficit of 1.6 percent of GDP and 1QFY20’s fiscal deficit of 0.7 percent of GDP.

    All the four provinces recorded a budgetary surplus during the first nine months of current fiscal year, while only Punjab recorded a budgetary deficit in 3QFY20.

    During the 9MFY20, Total Revenues increased by 31 percent YoY, where the improvement was led by 14 percent YoY higher Tax Revenues (Mar-2020 revenues partially affected by COVID-19) and 160 percent YoY higher Non-Tax Revenues.

    Looking into further breakup of revenues, government collected 15 percent YoY higher Direct taxes, 18 percent YoY higher Sales Tax and 40 percent YoY higher Petroleum Levy during 9MFY20. In 3QFY20, the same were down by 16 percent QoQ, 16 percent QoQ and 17 percent QoQ, respectively.

    The government hugely benefitted from 360 percent YoY higher profits from State Bank of Pakistan (SBP) in 9MFY20 (down 13 percent QoQ in 3QFY20), which is around 1.4 percent of GDP.

    On the expenditures front, Total Expenditure increased by 16 percent YoY. Current Expenditures increased by 17 percent YoY, where Mark-up Payments were up 29 percent YoY and Defense Expenditures were up 4 percent YoY. Excluding these items, government’s own expenses increased by 14 percent YoY during 9MFY20.

    The decline in interest rates helped the government reduce the interest bill by 16 percent QoQ during 3QFY20.

    The Development Expenditure remained steady, where growth of 14 percent YoY was witnessed in 9MFY20. In 3QFY20, the same declined by 6 percent QoQ.

    In the wake of COVID-19, government’s expenses on Social Protection during the 3QFY20 clocked in at Rs13.9bn (vs. Rs701mn in 2QFY20 and Rs547mn in 1QFY20).

    Pakistan’s fiscal deficit to clock in at 9.0 percent of GDP in FY20 due to implications of COVID-19 on both revenues and expenditures, the analysts estimated.

  • Fiscal deficit narrows at 2.3% in first half 2019/2020

    Fiscal deficit narrows at 2.3% in first half 2019/2020

    KARACHI: The ministry of finance on Friday said that the fiscal deficit narrowed at 2.3 percent of the GDP during first half (July – December) 2019/2020 as compared with 2.7 percent in the corresponding half of the last fiscal year.

    Analysts at Topline Securities said importantly though, the primary balance during the period clocked in at 0.7 percent of GDP (last year was -0.3 percent of GDP), within the target of 0.6 percent set by the IMF.

    In the second quarter of 2019/2020, the fiscal deficit came in at 1.6 percent of GDP compared to first quarter of current fiscal year deficit of 0.7 percent of GDP.

    All the four provinces recorded a budgetary surplus during the first half and second quarter of the current fiscal year.

    During the first half of 2019/2020, total revenues increased by 39 percent YoY, where the improvement was led by 18 percent YoY higher tax revenues (however less than targeted) and 213 percent YoY higher non-tax revenues.

    Looking into further breakup of revenues, government collected 17 percent YoY higher Direct taxes, 24 percent YoY higher Sales Tax and 68 percent YoY higher Petroleum Levy during first half of the current fiscal year.

    The government hugely benefited from 575 percent YoY higher profits from State Bank of Pakistan (SBP) in the first half of the current fiscal year (also 31 percent QoQ higher in the second quarter of the current fiscal year), which is around 0.8 percent of GDP.

    The fees fetched through the auction of telecom licenses (PTA profits: 607 percent YoY higher in the first half of the current fiscal year) also helped the government achieve the primary balance target.

    On the expenditures front, total expenses increased by 26 percent YoY. Current expenditures increased by 25 percent YoY, where Mark-up Payments were up 46 percent YoY and Defense expenses were up 10 percent YoY. Excluding these items, government’s own expenses increased by 17 percent YoY during the first half of the current fiscal year (also up 49 percent QoQ in second quarter of the current fiscal year).

    _ The development expenditure remained healthy, where growth of 28 percent YoY was witnessed in 1HFY20 and 122 percent QoQ in 2QFY20.

  • Fiscal deficit balloons to record 8.9 percent in 2018/2019

    Fiscal deficit balloons to record 8.9 percent in 2018/2019

    Pakistan’s fiscal deficit surged to an unprecedented level of 8.9 percent of Gross Domestic Product (GDP) during the fiscal year 2018-2019, as per the latest data released by the federal finance ministry on Tuesday.

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  • Budget 2019/2020: Rs5,550 billion tax collection target set to reduce fiscal deficit

    Budget 2019/2020: Rs5,550 billion tax collection target set to reduce fiscal deficit

    ISLAMABAD: State Minister for Revenue Muhammad Hammad Azhar on Tuesday said that the government has set a challenging target of Rs5,550 billion revenue collection target for Federal Board of Revenue (FBR) in order to reduce the fiscal deficit.

    Presenting budget for fiscal year 2019/2020 on floor of house, the state minister said that by reducing imports and aiming for higher exports.

    “We want to bring current account deficit from $13 billion estimated this year to $6.5 billion in 2019-20,” he said.

    For increasing exports, the government will:

    Support duty structure on raw materials and intermediate goods

    Improve mechanism for tax refunds

    Provide electricity and gas at competitive cost

    Redo the Free Trade Agreements and make Pakistan part of the global value chain.

    He said that a challenging target of Rs.5,555 billion FBR revenue collection will be combined with aggressive expenditure controls to reduce primary deficit to 0.6 percent of GDP.

    Both the civil and military governments have announced unprecedented reduction in expenditure.

    He said that the government’s top priority is to enhancement of taxes.

    Pakistan has one of the lowest tax-to-GDP ratios at below 11 percent which is lower than others in our region. Only 2 million people file income tax returns – of which 600,000 are employees. 380 companies alone account for more than 80 percent of the total tax.

    There are over 341,000 electricity and gas connections – but only 40,000 are registered with sales tax.

    Only 1.4 million out of 3.1 million commercial consumers pay tax. There are estimated 50 million bank accounts but only 10 percent pay taxes. Out of 100,000 companies registered with Securities and Exchange Commission of Pakistan (SECP only half pay tax.

    Many rich do not to contribute to our taxes. This has to change in Naya Pakistan.

    Austerity shall be put in place in the regular civil and defence budgets. As a result, the running of civil government which was Rs.460 billion this year, is being budgeted at Rs.437 billion for the coming year, a decrease of 5 percent.

    The defence budget is being maintained at the last year level of Rs.1,150 billion. “In taking these difficult decisions on austerity, I want to appreciate the wisdom of the Prime Minister and the support of armed forces leadership in particular the Army Chief. Let me be clear on one point the sovereignty and defence of Pakistan is paramount.”

    All other considerations are secondary to that of national dignity and honour. We will ensure that the capacity of our armed forces to defend our country and our people is never compromised.

    Pakistan cannot develop until we reform our tax system. Historically, we have under allocated for health, education, drinking water, municipal services, and things that matter to the people. Now we are reaching a point where we have difficulty in paying our debts and even our salaries without recourse to borrowing. This situation has got to change.