Failing to achieve other major economic targets, the incumbent government has successfully restricted budget deficit below the target as it remained at 5.7 percent of the GDP (Rs 1482 billion) during previous financial year 2013-14.
The government had set budget deficit target at 6.3 percent of the GDP (Rs 1638 billon) during last fiscal year 2013-14. However, later, the government had agreed with the International Monetary Fund (IMF) to bring the deficit to 5.8 percent of the GDP (Rs 1508 billion). But, the government has brought down the deficit to 5.7 percent of the GDP apparently due to the foreign inflows like auction of Eurobond and $1.5 billion Saudi grant.
“The budget deficit calculated at 5.7 percent of the GDP during previous fiscal year”, said Rana Asad Amin spokesperson and advisor of the Finance Ministry while talking to The Nation on Friday. However, he did not share further details regarding total revenue, expenditure and others.
The government had missed the major economic targets during last financial year 2013-2014 that included GDP growth target, tax collection target, inflation target, trade deficit target and many others. However, the government has achieved the fiscal deficit target, which the Finance Minister Senator Ishaq Dar termed as ‘mother of all ills’. Meanwhile, Pakistan had assured the IMF that the deficit would be lowered from 5.7 percent of GDP to 4.8 percent of GDP during ongoing financial year 2014-15.The envisaged fiscal adjustment is underpinned by tax revenue measures amounting to 0.8 percent of GDP and further rationalisation of subsidies of 0.5 percent of GDP. These additional revenue efforts will ensure that the reduction in capital spending undertaken to address the tax revenue shortfall in FY2013/14 does not become permanent.
It is worth mentioning here that the government had heavily relying on non-tax revenues and provincial budget surplus during last financial year to control the budget deficit. The Federal Board of Revenue (FBR) had failed to achieve the revised revenue collection target during previous financial year. The government had set revenue collection target at Rs 2475 billion for the last fiscal year, which later slashed to Rs 2345 billion owing to the poor performance of the tax department. However, the FBR was unable to achieve the revised target and government further reduced the target to Rs 2275 billion. But the tax department even failed to achieve this target by Rs nine billion, as FBR collected Rs 2266 billion during previous financial year 2013-14.
The Economic Survey 2013-14 stated Pakistan’s fiscal sector is confronted with challenges in the past on account of structural weaknesses in tax system. Consequently, the economy has witnessed low tax to GDP ratio. On the other hand expenditure overrun surpassed the revenue increase due to high interest payments, untargeted subsidies and less than expected revenues. However, during the current fiscal year, situation has started to improve on account of reform agenda initiated by the present government soon after coming into power in June 2013.