Government fails to contain fiscal deficit in 1HFY17

The government has been unable to contain the fiscal deficit in the first half of the current fiscal year despite showing a Rs57 billion statistical discrepancy and a Rs42 billion provincial surplus, primarily because of much lower than expected non-tax and tax revenue.
According to consolidated budgetary operation for the first six months of the current fiscal year (July-December 2016), non-tax revenue collection was 0.7 percent of the GDP against the budgetary target of 3.1 percent for 2016-17 consequent to very low inflows as opposed to estimates in the budget. As a result, the fiscal deficit stood at 2.4 percent during the half year against the annual target of 3.8 percent despite a static discrepancy of Rs57.182 billion.
The inflows on account of non-tax revenue were Rs249.4 billion during the first six months of the current fiscal year against Rs959 billion projected for entire fiscal year, primarily because only Rs8.8 billion mark-up of PSEs was materialised against the projected target of Rs81 billion, Rs12 billion dividend against annual target of Rs85 billion, Rs87 billion surplus profit of State Bank of Pakistan (SBP) against the estimated amount of Rs280 billion, and Rs4.5 billion from defence (coalition support fund) during the first half against a budgetary target of Rs170 billion.
The government had projected Rs75 billion non-tax revenue from profit of Pakistan Telecom Authority (PTA); however, only Rs599 million were materialised in the first six months.
The total tax revenue during the first six month was Rs1,990 billion, 5.2 percent against the annual target of 12.9 percent, while expenditure stood at Rs2,789 billion during the first six months, creating a budget deficit of Rs799 billion.
The deficit was bridged by Rs558 billion borrowing domestically and Rs240 billion externally, Rs42 billion provincial surplus, showing a Rs57 billion statistically discrepancy. The Federal Board of Revenue (FBR) tax collection remained Rs1,467 billion.
The current expenditure during the first six months remained Rs2,241 billion due to Rs647 billion mark-up payment and defence expenditure of Rs336.3 billion as well as public sector development spending of Rs465 billion, including Rs198 billion federal and Rs247 billion provincial, during the first six months of the current fiscal year.
Total provincial expenditure during the first six months of the current fiscal year stood at Rs1,022 billion along with Rs1064 billion revenue with a budget surplus of Rs42 billion while provincial taxes were Rs145.7 billion.