The decline in fiscal deficit from 1.4 percent in the first quarter of last year to 0.7 percent in the first quarter of the current year is attributable to lower releases, additional SBP profit and non release of supplementary grants.
Providing details, a senior government official told Business Recorder on condition of anonymity the following: (i) non-utilization of PSDP however the official did not provide a ballpark figure as to the amount involved; (ii) SBP profit of Rs 185 billion compared to the budgeted Rs 100 billion in the first quarter; details of how this was generated given the (iii) Rs 70 billion issuance of telecommunication licenses; (iv) Rs 23 billion subsidies withheld; and non-releases of Rs 50 billion supplementary grant.
Well-informed sources said that this is an 'artificial' way of containing the fiscal deficit instead of pursuing a long term and sustainable way by broadening the tax revenue of the federal board of revenue (FBR) and doing away with unnecessary expenditure and wastage both at federal and provincial levels.
Sources further said that there is neither an increase in revenue of the FBR (FBR shortfall for the first quarter was Rs 166 billion) nor any visible sign or seriousness of the present administration to reduce expenditure. Slow PSDP releases would have negative repercussions on growth whose spillover impacts would be on poverty and unemployment. There has been some increase in SBP profit due to an undervalued rupee.
Payment of refunds of Rs 30 billion in cash to exporters would also contribute to fiscal deficit in the second quarter as the amount would be made available to exporters from FBR revenue collection while the Rs 23 billion power sector subsidy withheld by the government to contain the fiscal deficit will lead to higher circular debt.
The issuance of Rs 250 billion Sukuk bonds for settlement of circular debt will also contribute to the fiscal deficit if the amount is reflected in lending, the sources concluded.
Copyright Business Recorder, 2019
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