Fiscal deficit contained at 2.5pc of GDP in first half of FY21

ISLAMABAD: The effective expenditure control measures taken by the government have resulted in containing the overall fiscal deficit at 2.5 percent of the Gross Domestic Product (GDP) during the first half of the current fiscal year (2020-21).

For the Financial Year 2020-21, the overall fiscal deficit was projected at 7.0 percent of the GDP, official sources said.

“Overall Mid-Year Fiscal indicators have shown encouraging results as considerable growth in net revenue and effective expenditure control measures have helped contain the overall fiscal deficit to 2.5% of the GDP,” according to Mid-Year Budget Review Report FY 2020-21.

According to the report, the primary surplus during the period under review was recorded at 0.7 percent during July-December FY2020-21.

The break up figures of the report reveal that the gross federal revenue receipts during the period under review were recorded at Rs3,072 billion, including Rs1280 provincial share and Rs1792 net federal revenue receipts.

On the other hand, the total federal expenditures were recorded at Rs3,185 billion, including Rs2,915 billion current expenditures and Rs270 as development and net lending expenditures.

According to the data, the federal budget deficit was recorded at Rs1,393 billion whereas the deficit in terms of percentage was recorded at 3.1 percent.

The primary balance has been recorded at Rs82 billion or 0.2 percent of GDP whereas the provincial surplus was recorded at Rs255 billion.

The overall fiscal deficit was recorded at Rs1,138 billion or 2.5 percent of GDP, the data revealed adding that the overall deficit for the whole fiscal year 20120-21 was estimated at Rs3,194 billion or 7 percent of GDP.

According to the report, the Fiscal consolidation measures taken by the government have resulted in financial discipline, higher revenues and controlled expenditures.

“The same strategy will be followed during the remaining period of the CFY (current financial year) to achieve the fiscal sustainability,” the report added.

According to the report, the continuity in fiscal consolidation, stable exchange rate, improved current account and better financial management, presents a promising economic outlook.

However, there are certain risks to fiscal sustainability, it said adding that going forward the fiscal position would depend on the domestic and international evolution of Covid-19.

On the other hand faster than anticipated economic revival was likely to increase demand for inputs.

Finance Division has adopted the facilitative policy of release of funds to meet the expenditures, both re-current and development, in accordance with the government spending priorities.

“Nevertheless, the half year fiscal position indicates that it will remain on track to meet the annual fiscal targets,” the report added.

On the revenue side, FBR tax collection grew by 5.6 percent during the first half of the Current Financial Year (CFY) on a Year-on-Year (YOY) basis despite an upsurge of Covid-19.

Nontax revenue remained at par with the previous year collection during the same period in spite of reduction in State Bank of Pakistan (SBP) profits and non-realization of fees from cellular license renewals.

Current expenditure was controlled through austerity measures and strict financial discipline, it said however, Covid-related expenditures were made to provide relief and mitigate the impact of the pandemic.

Nevertheless, the increase in the federal net revenue and containment of expenditure limited the federal deficit to 3.1 percent of GDP. Similarly, the current account balance continued to improve, posting a surplus of USD 1.1 billion (0.8% of the GDP) during the first half of CFY.