The PTI government has failed to increase the revenues and to control the expenditures to narrow the gap between the two to bring down the budget deficit in its first year in power. According to the Bloomberg and figures released by the finance ministry, Pakistan’s budget deficit rose to the highest in almost three decades.
The PTI led federal government spent 20% more than last year but its total revenues were 6% lower than the preceding year. Debt and defence spending consumed Rs3.23 trillion or 80% of federal government revenues.
The budget deficit has risen to Rs 3.45 trillion. In GDP term, it is 8.9% of the GDP. The budget deficit was 6.6% of the GDP last year. The target set by the PTI government in its first full budget in June 2019 was to bring it down to 5.6% of the GDP. The target was to bring it down to Rs 1.9 trillion. The government is going to miss this target by a large distance.
The 8.9% deficit was the highest in the past eight years in terms of the size of national economy. In absolute terms, it was the highest-ever deficit, which broke last year’s record of Rs2.3 trillion.
The budget deficit in first year of the PTI government was worse than last years of the PPP and PML-N governments. Traditionally, the governments tend to spend more in their last year in power compared with the first year which has historically remained the year of consolidation.
In the second last year (2011-12) of the PPP government, the budget deficit was equal to 8.8% of GDP, which came down to 8.2% of GDP in its last year. The PML-N closed its accounts at a budget deficit of 6.6% in fiscal year 2017-18.
Despite Prime Minister Imran Khan’s austerity drive, the PTI government has failed to contain its expenditures and enhance revenues. If one goes by the words of PM Imran, the tax collection figures suggested that people did not trust the PTI with their money.
If this trend continues throughout the year, it means PTI government will take more loans and will impose more indirect taxes. As the result, inflation and price hike will continue to rise. It means more burden on the already impoverished people.
It is not good news for the PTI government which is already struggling to put the economy on right track. This news came out at crucial time when the first review of IMF loan agreement is coming close. The PTI government is also going to miss the revenue collection targets of first quarter of current financial year.
The troubling factor was a steep reduction in tax revenues, including that of the FBR, in terms of the size of national economy. Against preceding year’s revenues of 15.2% of GDP, the ratio slipped to just 12.7% at the end of first year of the PTI government.
The FBR’s tax revenues that stood at 11.2% of GDP in last year of the PML-N government, dropped to 9.9% in the PTI’s first year. The main reason was the FBR’s failure to achieve its Rs4.4-trillion annual tax collection target.
PTI government has failed to address the main issues and problems faced by the Pakistani economy in its first year in power. There is slight increase in the exports but not big enough to plug the huge gap between imports and exports.
Dominated by agriculture and textiles and with a large informal sector dominated by services sector that pays no tax, the economy has struggled to develop export industries. According to IMF forecasts, real GDP growth is expected to slow to 2.4% in the current fiscal year to June 2020, down from 3.3% in the year just ended.
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17 November, 2019