FY23 Q1 budget deficit rises 43pc to Rs809bn YoY

LAHORE: Pakistan’s budget deficit in the first quarter of this fiscal year increased by 43 percent to Rs 809 billion due to rising ongoing expenditure, interest payments on local debt, and increased defence spending. The budget deficit was 438 billion rupees in the same period of the last financial year.

As per official statistics, the government’s total revenue in the first quarter of this financial year was 2.02 trillion rupees, compared to the revenue of 1.81 trillion rupees in the same period of the previous financial year. In the first quarter, the tax revenue stood at 1.78 trillion rupees, which was 1.53 trillion rupees in the same period of the previous financial year. Due to a slowdown in economic activities during the period under review, non-tax revenue stood at Rs 235 billion as against Rs 276 billion in the first quarter of the previous fiscal year.

From July to September 2022, the total expenditure of the government reached 2.83 trillion rupees, which was 2.25 trillion rupees in the same period of the previous financial year. The country’s economy is facing a balance of payment crisis along with a budget deficit. This twin deficit has gripped Pakistan’s economy, which has affected economic growth and is also increasing the risks of default on Pakistan, data shows.

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Economists said that instead of reducing the budget deficit by imposing taxes, the government can control the internal debt more effectively by bringing illegal trade and undocumented economy under the ambit of the law.

Emphasizing the need for uniform and strict application of laws to remove this structural weakness of Pakistan’s economy, they said that the high tax rate is having a direct impact on the economic growth of the country. He said that excessive dependence on taxes cannot be a long-lasting way for the development and economic growth of a country. “Tax evasion tends to develop naturally in an environment of heavy or high tax rates, an example of which is the tobacco industry in Pakistan, in which the increase in taxes without reducing the volume of illegal trade is only causing the cost of doing business for two leading players and the government itself is losing a huge revenue from this sector,” they opined.

It may be noted that the volume of illegal cigarette trade in Pakistan is the highest among Asian countries; two out of every five cigarettes sold in the cigarette industry are being sold at a much lower price than the government’s fixed rate by evading tax not only denting the national exchequer but also an increasing the threats to public health.

Copyright Business Recorder, 2022