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ISLAMABAD: The Finance Ministry Tuesday said that despite higher mark-up payments and Covid-related expenditures, the fiscal deficit as percentage of the GDP stood at 3.5 percent (Rs1,603 billion) during July-February 2021 compared to 3.7 percent (Rs1,613 billion) for the same period a year before.

According to monthly economic update and outlook of April 2021 released by the Finance Ministry, better prospects of economic growth are visible subsequent to timely, appropriate measures taken by the government to tackle the third wave of the pandemic and risks are mitigated.

The Finance Ministry added that a healthy tax demand of Rs1.7 trillion has been created during the first three quarters of the year, out of which 91 percent of the tax has been imposed by the LTOs, and four percent by the Corporate Tax Offices (CTOs).

All 18 RTOs having been absolved of revenue targets per sector, now focus only on broadening of tax-base, monitoring of withholding taxes, redressing taxpayers’ grievances and complaints, processing of refunds and raising deterrence by making out tax fraud cases.

During 1st three quarters of the year, an unprecedented sum of Rs180 billion has been released to exporters through FASTER-Plus – leaving zero payable balance and track and trace system has been procured by the FBR for tobacco, cement, sugar, fertilizers, beverages, and petroleum sectors and it would be rolled out from July 1, 2021, and would annually contribute over Rs100 billion in revenue.

A Post Refund Analysis Cell (PRAC) –established at the FBR Headquarters to detect cases of tax fraud involving substantial refund and illegal input tax, has so far detected fraud involving an amount of approximately Rs15 billion.

According to the economic outlook, while there was over 42 percent decline in total foreign direct investment, the finance ministry stated that entering into international capital market after a gap of over three years and raising $ 2.5 billion successfully has shown investors’ confidence on better prospects of the economy.

The Federal Board of Revenue (FBR) tax collection has witnessed a double digit growth during the first nine months of fiscal year 2021, which is a reflection of growing economic activity in the country, despite facing the challenge of the third wave of Covid19.

The fiscal performance during the first eight months of fiscal year was an indication of successful adherence to fiscal discipline through careful expenditure management and efforts to improve the revenues.

The ministry said that the current revenue performance is expected to improve further during the last quarter of fiscal year 2021 relative to the same period of fiscal year 2020 when economic activities were interrupted due to Covid-19.

Total foreign investment (foreign direct investment and portfolio) contracted from $2.377 billion during July-March 2020 to $1.126 billion in March 2021 after a decline of 52.6 percent.

A decline of 35.1 percent was recorded in foreign direct investment as it declined to $1.395 billion in July-March 2020-21 from $2.15 billion for the same period a year before whereas portfolio investment declined from $331.1 million in July-March 2019-20 to negative $3.5 million in July-March 2020-21.

Exports increased 2.3 percent during July-March 2020-21 to $18.6 billion from $18.3 billion for the same period a year before and imports increased by 9. 4 percent to $37.4 billion in July-March 2020-21 from $34.1 billion in July-March 2019-20.

Provisional disbursement of agriculture credit increased by 4.6 percent to Rs953.7 billion during July-March 2020-21 from Rs912.2 billion for the same period a year before and credit to private sector (flows) after an increase of 16.9 percent stood at Rs 399.7 billion (from 1st July to 9th April 2020-21) compared to Rs342 billion during 1st July to 10th April 2019-20.

Production of cotton (7.0 million bales) is expected whereas, major Kharif crops have surpassed the production targets of 2020-21 (Rice: 8.4 million tons, sugarcane: 81.0 million tons and Maize: 8.4 million tons).

For Rabi season 2020-21, wheat crop production is estimated at 26.04 million tons, showing an increase of 3.1 percent against last year’s production of 25.25 million tons.

This increase in production is due to increase in area under cultivation attributed to the policy support.

The Finance Ministry maintained that despite higher mark-up payments and Covid-related expenditures, the fiscal sector continues to perform better fiscal discipline.

The first eight months of the current fiscal year have witnessed an increase of 9.2 percent in net federal revenue receipts to reach Rs2,188 billion (Rs2,003 billion last year).

Total expenditures grew by 1.3 percent to Rs4,132 billion during July-February of fiscal year 2021 against Rs4,079 billion for the same period of last year.

The primary balance posted a surplus of Rs286 billion during July-February fiscal year 2021 compared to Rs104 billion for the same period of last fiscal year.

Copyright Business Recorder, 2021

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