The government has failed to rein in the fiscal deficit that has soared to Rs 545 billion during the first half (July-December) of the current fiscal year, translating to 55 percent of the revised budget deficit projection and 2.5 percent of the GDP, against an estimated 2.35 percent of the GDP, says the Mid-Year Budget Review 2011-12. Besides other factors, the reasons for the spiralling deficit include zero receipts against the Coalition Support Fund (CSF) payments that were projected at $1.2 billion in the budget 2011-12, the process for auction of 3G licences having left incomplete and a loss of Rs 50-100 billion during the current fiscal year due to a delay in implementing reform initiatives in the power sector. According to the review, a copy of which is exclusively available with Pakistan Today, the overall fiscal deficit in the budget 2011-12 was estimated at Rs 851 billion (4 percent of the GDP), which, however, was revised to Rs 986 billion (4.7 percent of the GDP) – an increase of 0.7 percent – due to heavy rains and floods in Sindh and previous obligations relating to relief work for the people affected by the 2010 flood, revision of CSF receipts from $1.2 billion to $800 million, a shortfall in revenue from oil and gas sector due to delayed passage of reduced duty and the outstanding circular debt. Marginal increase in power tariff differential subsidy due to delayed revision of power tariff increase also contributed to a revision in the fiscal deficit from four percent to 4.7 percent of the GDP.
However, based on revenue and expenditure figures, the federal fiscal deficit during the first half of the fiscal year 2011-12 has amounted to Rs 545 billion (2.5 percent of the GDP), which the government was supposed to curtail at 2.35 percent of the GDP.
The review says total expenditure during the July-December 2011 period stood at Rs 1,161 billion, or 45 percent of the annual target, against a target of 50 percent.
Provincial surplus amounted to Rs 12 billion against Rs 79 billion for the corresponding period last year. Deficit financed through net external financing amounted to Rs 34 billion, non-bank financing Rs 196 billion and bank financing Rs 302 billion.
Risks to budget 2011-12: According to the mid-year budget review, FBR tax revenue collection during July-December 2011 amounted to Rs 845 billion, 43 percent of the budgeted estimate, while 57 percent of the budgeted estimates have to be achieved during the remaining six months of the current financial year and require special efforts and work improvement.
On account of petroleum levy receipts, the national exchequer suffered a loss of Rs 30 billion during the first six months of the current financial year due to the non-passage of original petroleum levy rates, especially for High Speed Diesel.
CSF receipts were projected at 1.2 billion dollars, but no amount was received during the said period.
An amount of Rs 75 billion was projected in the budget 2011-12 on account of auction of 3G licences. The basic process for auction had been started, but needs completion to realise the estimated revenue.
Reform initiatives for the power sector were also initiated, but their complete implementation remains to be seen and delays in this regard may cause a loss of Rs 50-100 billion during the year, the review says.
PSDP 2011-12 The budget for the federal Public Sector Development Programme (PSDP) 2011-12 was set at Rs 300 billion (foreign aid of Rs 39 billion). During the July-December 2011 period, an amount of Rs 114 billion (44 percent) was released. Funds amounting to Rs 22.3 billion were released for People’s Works Programme I and II. An amount of Rs 3 billion was released for the Earthquake Rehabilitation and Reconstruction Agency (ERRA), while the Planning and the Development Division released Rs 89 billion for federal ministries, special areas and corporations.
Supplementary Grants
Supplementary grants allowed during July-December 2011 amounted to Rs 4.7 billion, of which Rs 1.5 billion were meant for relief operations in the rain-affected areas of Sindh, Population Census Organisation headquarters was given Rs 0.7 billion and grants to NADRA for Citizen Damage Compensation Package amounted to Rs 0.7 billion. A supplementary grant amounting to Rs 390.7 billion was also provided for consolidation of previous years’ arrears on account of tariff differential subsidy (Rs 312.8 billion), TCP (Rs 63.2 billion) and PASSCO (Rs 14.7 billion).
Fiscal Operations: Total revenue estimated in the budget 2011-12 was Rs 1,529 billion, which was revised to Rs 1,426 billion. But during the first half, the revenue earned was Rs 616 billion, which is 43 percent of the revised projection.
Total expenditure estimated in the budget was Rs 2,504 billion and revised to Rs 2,566 billion later, however, the actual expenditure was Rs 1,161 billion or 45 percent of the revised projection.
In the budget, provincial surplus/deficit was set at Rs 124 billion, revised to Rs 154 billion, however, the actual figure was Rs 12 billion, which is 8 percent of the revised projection. Deficit as percentage of the GDP was estimated at four percent, revised to 4.7 percent, however, the actual deficit is 2.5 percent. Nominal GDP (market price) remains Rs 21,042 billion throughout the budget, the review says.
Revenue Receipts: Federal revenue in the budget was set at Rs 2,732 billion of which the FBR was to contribute Rs 1,952 billion. However, actual FBR revenue stood at Rs 845 billion, which is 43 percent of the revised projection. Other revenue receipts were estimated at Rs 780 billion, revised to Rs 677 billion, but the actual receipts amounted to Rs 237 billion, which is 35 percent of the revised projection. Gross revenue in budget was estimated at Rs 2,732 billion, revised to Rs 2,629 billion, but actual revenue remained Rs 1,082 billion or 41 percent of the revised projection. Provincial transfer in the budget was estimated at Rs 1,203 billion, but actual figure for the period was Rs 466 billion, which is 39 percent of the revised projection.
Net revenue set in the budget was Rs 1,529 billion and was revised to Rs 1,426 billion, however the actual revenue amounted to Rs 616 billion, 43 percent of the projection.
Federal expenditure: Current expenditure in the budget 2011-12 was set at Rs 2,204 billion and was revised to Rs 2,266 billion, but the expenses in July-December stood at Rs 1,035 billion or 46 percent of the revised projection. Interest payments were estimated at Rs 791 billion, revised to Rs 795 billion, but actual payments were Rs 397 billion, which is 50 percent of the revised projection. Defence expenditure was estimated at Rs 495 billion and the actual figure for the period was Rs 243 billion, 49 percent of the projection.
Financing of deficit: Deficit financing in the budget was set at Rs 851 billion and later revised to Rs 986 billion, however, actual (July-December) financing amounted to Rs 533 billion or 54 percent of the revised projection.
External financing was set at Rs 134 billion but revised to Rs 146 billion and the actual (July-December) figure was Rs 34 billion, which is 23 percent of the revised projection. Domestic financing was revised to 840 billion from Rs 717 billion and the actual amount in the period was Rs 499 billion, which is 59 percent of the revised projection.
