The government's expenditure posted growth of some 13 percent during first half of current fiscal year mainly due to rising lending, defence and other government spending. The ratio of total expenditures to GDP rose to 8.6 percent in July-December of fiscal year 2010-11, which was relatively lower than the level observed in the same period of last year.
The ratio of total expenditure to GDP was about 9 percent in first half of fiscal year 2009-10. The government's overall expenditures mounted to Rs 1.480 trillion during first half of current fiscal year as compared to Rs 1.313 trillion in same period of last fiscal year, depicting a surge of Rs 167 billion. Major increase was witnessed in the current expenditures, which grew by 16 percent to Rs 1.226 trillion during July-December of FY 2011 as compared to Rs 1.058 trillion in corresponding period of last fiscal year. Current expenditures comprise interest payment, grants, defence and other federal government expenses.
Analysts said that at the federal level, about 69.5 percent of the increase in spending was driven by defence, running of the government and net lending activities. In addition, expenses under the running of the government head registered an increased of 23.4 percent YoY, mainly reflecting the impact of higher salaries and allowances for federal government employees announced in the current fiscal year budget.
According to Ministry of Finance statistics, during July-December, with an increase of 5.5 percent, the government spent Rs 310.4 billion on interest payment and Rs 96.4 billion for running of federal government. Defence spending also registered a surge of 29.5 percent to Rs 215 billion in first six months of current fiscal year as against spending of Rs 166 billion in corresponding period of last fiscal year. During the period under review Rs 98.5 billion was spent on grants and Rs 350.8 billion was transferred to provinces.
Development spending remained conspicuously low during first half, posting a decline of 35.7 percent, and an important component of development, PSDP, with decrease of 29 percent or Rs 50 billion stood at Rs 124.9 billion in December 2010. Analysts said that flood relief measures also claimed heavy amount of consolidated public expenditures during the period, while, at the provincial level, both current and development spending recorded a hefty increase which largely offset transfer of resources to provinces under the 7th NFC award.
Similarly, net lending expenditure posted 330 percent surge to Rs 63.4 billion and unidentified expenditures reached Rs 45.4 billion after 200 percent growth. Month on month basis, total expenditure during the first quarter stood at Rs 676 billion and Rs 803 billion in second quarter and flood related expending was the major reason of high expenditures in second quarter.