Enhancing spending limit increases fiscal deficit to 5 percent


Increase made in the allocation for development spending next fiscal year under political pressure has increase the fiscal deficit estimate to 5 percent of the gross domestic product (GDP) as compared to the earlier estimate of 4.2 percent projected in the budget strategy paper.
An official source said that the top hierarchy of the incumbent coalition political parties stressed enhancing development spending in an election year to garner the much needed political support in their constituencies.
The government had finalized a federal Public Sector Development Program of Rs 360 billion but due to the pressure of the party parliamentarians and allied parties it was decided to allocated Rs 100 billion more for developmental spending outside PSDP. This makes a total development outlay of Rs 460 billion for the next fiscal year.
Enhancing the spending limit has also come as a relief for the finance team, as decline of nearly two percent in fiscal deficit within one fiscal year was not an easy task, the source said adding that the fiscal deficit will be more than 6 percent in the current fiscal year and next year it will be 5 percent, which will be easy to achieve.
The incumbent government has set a record as during the last four years under its rule the fiscal deficit has remained over 6 percent of GDP, resulting in heavy borrowing that has in turn given rise to stubborn double digit inflation. Coupled with the energy crisis, new investment has nearly dried in the country.
The federal budget for next fiscal year will be presented on June 1 with a likely outlay of Rs 2.975 trillion and tax collection target of Rs 2.338 trillion. Provinces will be getting 18 percent more share from the federal taxes, as the centre has estimated transfer of Rs 1.427 trillion in the next fiscal year against the projection of Rs 1.245 trillion in the current fiscal year.