ISLAMABAD: The Finance Division has acknowledged that a manageable current account deficit and its guaranteed financing by healthy financial inflows are required.
The Finance Division, in its monthly economic update and outlook for the November 2022 noted, during the first quarter of the fiscal year 2023, acceleration in total expenditures outpaced the growth in revenues. The additional requirement of substantial expenditures on flood-related activities has brought various challenges to fiscal sustainability.
Furthermore, in an already constrained fiscal position, the government is compelled to allocate additional funds to maintain the law and order situation due to the ‘long march’ in the country.
All these would put pressure on total expenditures. On the revenue side, although the FBR tax collection has maintained its growth trajectory above 16 percent during the first four months, the slowdown in economic activity due to floods and political activity may have some repercussions on tax collection.
It further stated that the targets fixed for current Rabi 2022-23 crops seem to be challenging due to delayed sowing in the flood-affected areas.
However, timely rains may positively impact production in the agriculture sector. Furthermore, the Kissan Package will reduce the burden on farmers and revive the agriculture sector. Delayed sowing of wheat crop in Sindh is making it challenging to achieve the targets set for Rabi-2022-23 season. However, the supporting measures by both federal and provincial governments may reverse the negative effects on the agriculture sector.
Industrial activity, measured by the LSM index is the sector that is most exposed to the developments in international markets as LSM remained subdued in September 2022. Pressure on the automobile sector also remain sustained throughout the first four months of the fiscal year 2023 as car production and sale decreased by 38.5 and 47.0 percent, respectively, trucks and buses production and sale decreased by 25.1 and 39.9 percent and tractor production and sale decreased by 36.7 and 46.7 percent, respectively during the first quarter of the ongoing fiscal year.
During the first quarter of the current fiscal year, total revenue increased by 12 percent to Rs2,017 billion against Rs1,809 billion in the same period last year. Within revenues, total tax collection grew by 16 percent while receipts from non-tax fell by 15 percent. Similarly, total expenditures grew by 26 percent to reach Rs2,826 billion in Q1FY23 against Rs2,247 billion in the same period of last year. Consequently, the fiscal deficit increased to 1.0 percent of GDP in Q1 FY2023 against 0.7 percent recorded in the same period of last year. The primary balance posted a surplus of Rs.145.3 billion in Q1FY23 against a surplus of Rs184.2 billion in the comparable period of last year.
The remittances have decreased by 8.6 to $9.9 billion during July-October 2022 from $10.8 billion for the same period a year before and FDI by 52.1 percent to $348.3 million from $726.6 million. Exports have increased by 2.6 percent to $9.8 billion during July-October 2022 from $9.6 billion for the same period a year ago and imports decreased by 11.6 percent.
Copyright Business Recorder, 2022