Pakistan’s fiscal deficit widens 23% in first half

KARACHI: Pakistan’s fiscal balance in the first half (July-December) of the fiscal year 2022/23 posted a deficit of Rs1.683 trillion, 23 per cent YoY higher than the prior year’s deficit.

In terms of GDP, the deficit arrived at 2 per cent in the first half of FY23, same as the last year’s corresponding period figure, according to the data released by the Finance Ministry.

However, the primary balance during the period under review posted a surplus of Rs890 billion (1.1 per cent of GDP), compared with a surplus balance in primary account of Rs81 billion witnessed in the same period of the last year (0.1 per cent of GDP).

Primarily, the total revenue growth of 19 per cent in the first half of FY23 to Rs4.7 trillion (first half of FY22: Rs3.96 trillion) aided the fiscal balance, translating to 5.6 per cent of GDP against 5.9 per cent in the same period of the last year.

The total tax revenue collection went up 17 per cent YoY to Rs3.7 trillion. The Federal Board of Revenue (FBR) taxes clocked-in at Rs3.4 trillion during the period, 17 per cent YoY higher than the corresponding period of FY22 collection of Rs2.9 trillion. The growth in indirect taxes remained flat during the period under review from Rs1.9 trillion last year.

This was mainly on the back of flat sales tax growth, clocking-in at Rs1.272 trillion and 3 per cent YoY decline in the Customs duty to Rs467 billion.

Besides, direct taxes jumped up 50 per cent YoY to Rs1.526 trillion, mainly contributing to the overall revenue collection, analysts at Arif Habib Limited said.

Albeit, the government collected Rs967 billion in non-tax revenues, displaying a jump of 26 per cent YoY. This was particularly owed to higher collection under the head of the petroleum development levy of Rs177 billion, marking an increase of 154 per cent YoY.

Moreover, the dividend collection also improved 57 per cent YoY to Rs41 billion. On the contrary, surplus profit of the State Bank of Pakistan (SBP) remained absent, amid the amendments in the SBP Act 1956.

In addition, the total expenditures went up 20 per cent YoY to Rs6.4 trillion (7.6 per cent of GDP against 8 per cent of GDP in the first half of FY22).

Further breakup revealed that the current expenditures underwent an uptick of 30 per cent YoY, of which defence rose 23 per cent YoY. However, the markup payments marked a growth of 77 per cent YoY to Rs2,573 billion.

Moreover, the development expenditures and net lending undertaken by the government decreased 11 per cent YoY to Rs637 billion.

The total Public Sector Development Programme (PSDP) expenditures in the first half of FY23 arrived at Rs591 billion (up 5 per cent YoY) with the provincial expenditures of Rs454 billion (up 24 per cent YoY), outdoing the federal disbursement of Rs136 billion (down 32 per cent YoY).

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