By Staff Reporter
ISLAMABAD: The government’s hopes of slashing the budget deficit by half bombed as provinces posted a meagure surplus of Rs91 billion instead of Rs800 billion for the next fiscal.
The federal government had targeted to squeeze the budget deficit from 8.6 percent of the GDP in the outgoing fiscal year to 4.9 percent for FY2023.
Counting its chickens before they hatched, the government was betting the four provinces would generate a revenue surplus of Rs800 billion or slightly over 1 percent of the GDP for the next fiscal year, but most of the eggs broke in the basket.
Such slippage can prompt the IMF to come up with demands of increasing the Federal Board of Revenue’s (FBR) tax collection target from Rs7.004 trillion to Rs7.100 trillion or Rs7.200 trillion for the next fiscal.
Deliberations on the revenue side are underway with the IMF so both the FBR’s tax collection and non-tax revenue targets can be revised before the approval of the budget for 2022-23 from the National Assembly.
The changes in petroleum levy are also on cards.
There is an interesting footnote written on the budget document for 2022-23 which reads “figures are provisional. Final figures will be provided during the budget session”.
Three provinces have so far presented their budget for 2022-23 and generated a surplus of Rs91 billion for the next fiscal year.
This figure depends upon the basis of this assumption that the KP’s budget was in the balance but its Minister for Finance Taimur Khan Jhagra told IP (Independent Pakistan) the budget could be in surplus provided the federal government transferred their full share on account of Net Hydel Profits (NHP). “If the federal government did not provide our due share then KP might also generate a deficit,” Jhagra said.
Punjab has generated a surplus budget of Rs125 billion for the next fiscal year 2022-23, while Sindh unveiled its budget with a deficit of Rs34 billion so the net surplus stood at Rs91 billion. KP’s budget could be assumed to be balanced at the moment. Balochistan’s budget is yet to be presented, but the chances of its generating a sizable surplus as desired by the federal government are slim.
The surplus generated by the provinces assumes increased importance in the context of ongoing Pakistan and the IMF parleys for striking a staff-level agreement for the resumption of a $6 billion Extended Fund Facility (EFF).
Dr Khaqan Najeeb, renowned economist and former advisor at the Ministry of Finance, said two points were important here.
“One, the sanctity of the budget numbers is everything. A Rs709 billion shortfall means an increased deficit of almost 1 percent in FY2023. Secondly in essence this reliance on surplus is like sweeping the problem under the rug,” Dr Najeeb said.
“The bottom line is that NFC is unworkable as far as economic stability is concerned. It is important for the country to move to the 8th NFC award. At the same time, we should cut the federal government’s size in a big way and devolve subjects like health and education to provinces.”
He hoped Pakistan would be able to negotiate this hole of Rs709 billion with the IMF.
“There are ways to handle this with the IMF as we have done previously,” Dr Najeeb concluded.
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