With the unveiling of Balochistan Budget the overall consolidated Provincial Budget balance is expected to report a deficit of Rs5.6 billion whereas the Federal Budget is forecasting a surplus of Rs125 billion.
Assuming the provinces fail to post a surplus as per federal expectation, the consolidated deficit projection for FY12 would increase to Rs975 billion (or 4.6 per cent of GDP), from the official estimate of Rs849 billion (or four per cent of GDP).
The obvious impact of higher financing is likely to be borne by the domestic market as government aims to use bulk of the external receipts for repayment of upcoming foreign commitments. The situation will be further complicate if there are any shortcomings in tax revenue receipts in the next fiscal year.
Keeping all this in view the liquidity situation will remain tight throughout the year, unless government decides to borrow from the State Bank of Pakistan, said Muzzammil Aslam at JS. The Government has projected a consolidated deficit of Rs849 billion (4.0 per cent of GDP) which includes a cumulative provincial surplus of Rs125 billion. Carrying forth last year’s trend, majority of the financing requirements are expected to be met through domestic sources. Overall, 56 per cent of financing is likely to be met through non-bank borrowing, mainly saving schemes, while external sources are expected to finance only 1 per cent of the total deficit.
Punjab government announced a balanced budget of Rs655 billion for FY12 with a meager surplus of Rs70 million. The Sindh government projects receipts of Rs458 billion in FY12 and expenditures of Rs456 billion, resulting in a budget surplus of Rs882 million. The Balochistan government has announced the highest budget deficit of Rs6.7 billion. The government foresees consolidated receipts of Rs158 billion against expenditures of Rs176 billion.
The KP government announced a budget outlay of Rs249 billion, with a meager anticipated surplus of Rs190 million. As per the latest fiscal release for the first nine months of fical year 2010-2011 cumulative provincial balance was reported at Rs102 billion surplus with total revenue receipts of Rs795 billion and expenditures of Rs693 billion. Of the break up, interestingly, Khyber Pakhtunkhwa and Balochistan posted the largest surplus balances of Rs45 billion and Rs29 billion, respectively.
Punjab followed with a surplus balance of Rs19 billion, while Sindh reported a meager surplus of Rs10 billion. This conflicting data is either the result of consolidated deficit exceeding the four per cent target, or of cuts in development expenditure – either or both at federal and provincial level, Aslam added. If deficit exceeds financing pressure could result in excessive borrowing from the domestic market leading to a tight liquidity situation.
