The fiscal report card is not bad given the macro situation. The tax revenues growth jacked up due to higher commodity prices and currency depreciation. The tax collection directly and indirectly is dependent upon the imports. Around half of the ex-petroleum FBR taxes are collected at the imported stage. The tax revenues growth well surpassed the expenditure growth. However, the fall in non-tax revenues, that completely offset the tax revenue growth. The overall fiscal deficit is up by 21 percent to Rs1.37 trillion in the 1HFY22 – in terms of GDP it’s stood at 2.1 percent as compared to 2.5 percent (2.1% on the new-base) in the same period last year.
The overall fiscal revenues are up by 18 percent to Rs 3.96 trillion. Tax revenues are the star performer – up by 30 percent to Rs3.18 trillion. The real gains are from federal taxes – up by 32 percent to Rs2.9 billion. The impact on higher import prices is not direct on provinces as services prices are not moving up in tandem. Provincial tax revenues are up by 10 percent to Rs271 billion as services sales tax is the predominant provinces collection. Here the potential is in the real estate. The land value tax is too low, and land transactional taxes are at fraction of market prices. Nonetheless, non-tax revenues is the party pooper – down by 18 percent to Rs697 billion.
Within 32 percent growth to Rs2.92 trillion FBR taxes, customs duties are taking the lead – up by 42 percent to Rs480 billion. Imports (SBP) are up by 57 percent. That high imports are directly growing CD. And bulk of sales tax is collected at the imported stage too – its up by 39 percent to Rs1.27 trillion. The growth in direct tax is good but looks modest in comparison to others – up by 223 percent Rs1.02 trillion.
In non tax revenues, the bigger hit is in petroleum levy – down by 75 percent to Rs70 billion. The government is shying from passing the impact of growing oil prices to consumers. That is eating away the revenues and unabated demand is putting strain on imports. The gap between imports and tax revenues growth is due to lower sales tax rates on petroleum. With Brent at $85/barrel and gasoline prices crossing century mark, the government cannot sustain by compromising the PL and GST revenues from petroleum. Then the SBP profits remained flat (up by 2% to Rs380bn).
The total fiscal expenditure is up by 19 percent to Rs5.33 trillion. Same is the growth of current expenditure. The higher growth is in general-public service expenditure – up by 31 percent to Rs3.4 trillion. Grants (other than provinces) are the main culprit – up by 100 percent to Rs1.15 trillion. This is perhaps due to government buying of COVD vaccine. The government bought from its pocket 128 million doses during Jul-Dec, and payments for these have disproportionately increased the expenditure.
Debt servicing growth is down by 2 percent to Rs1.34 trillion even though foreign debt servicing is up by 119 percent to Rs140 billion. Superannuation allowance is growing by every quarter – up by 20 percent to Rs252 billion in the 1HFY22. Defence expenses growth is curtailed to 7 percent at Rs520 billion.
Total development expenditure is showing growth after some time. It is up by 25 percent to Rs571 billion. The growth in federal PSDP is up by 24 percent. There would be some break in the federal development spending in the second half due to fiscal austerity.
The financing mix of the fiscal deficit is tilted toward the external – up by 126 percent to Rs 1,026 billion while the domestic borrowing is down by half to Rs 346 billion. The mix should remain on external sources as there is a case of permanent domestic liquidity shortages – hovering around Rs2 trillion for a few months. That is why running primary fiscal surplus is important. The toll stood at Rs76 billion – one fourth of the value same period last year.
Comments
Comments are closed.