MoF says markup payments remain a challenge

ISLAMABAD: The Ministry of Finance has said markup payments remained a challenge as the government kept a strict check on other expenditures through vigorous implementation of austerity measures approved by the Federal Cabinet, well-informed sources told Business Recorder.

On March 30, 2024, while sharing mid-year 2023-24 review, Finance Division informed the Cabinet that section 34 of Public Finance Management Act, 2019 requires the Federal Government to place a mid-year review report before the National Assembly by the 28th of February each year.

It was explained that the report provides a comparison of budgeted and actual revenues, expenditure and financing, and that it was required to be published on Finance Division’s website after its placement before the National Assembly with the approval of the Cabinet.

Higher markup payments challenge persists: MoF

The Finance Division stated that the mid-year review report for FY 2023-24 provides a brief economic update on the first half of the current financial year and details of fiscal performance covering both revenues and expenditure.

The report also highlights financing operations undertaken by the Government through domestic and external means. It was added that during the period under review, the real sector showed mixed performance with agricultural production showing promising prospects.

The external sector saw significant recovery as the current account deficit reduced to $ 831 million in comparison to$ 3.6 billion in the corresponding period of last financial year.

On the fiscal front, consolidation efforts remained on track as revenues witnessed an increase of 63 percent, with 30 percent increase in FBR collection and 117 percent surge in non-tax revenues. Mark-up payments, however, remained a challenge as the Government kept strict check on other expenditures through vigorous implementation of austerity measures approved by the Federal Cabinet.

Financing was largely undertaken through domestic sources, with a highlight of first ever successful auction of Ijara Sukuk on the Pakistan Stock Exchange. With fiscal and external sector performance remaining on track, the Government successfully concluded the first review of the ongoing IMF program.

In the ensuing discussion, it was pointed out that the surplus required from the provinces under the IMF programme reduced their capacity to spend on education and health, which was counterproductive, since these two sectors were critical for human development.

In response, the Finance Division explained that the economy needed to be understood holistically in terms of fiscal outcomes, especially from the vantage point of the impact of budgetary deficits and their implication; and that it was not merely the federal deficit which influenced economic outcomes, but rather the consolidated deficit.

The Finance Division also clarified that it was up to the provinces to allocate budgetary resources to various sectors; that the surplus was not necessarily generated by a reduction of expenditures on health and education; and that it was not just the quantum of public spending that mattered, but more importantly, it was the quality of this spending that was critical.

Copyright Business Recorder, 2024