And the announcement continues to reverberate… | Pakistan Today

And the announcement continues to reverberate…

The federal budget outlay for FY13 stands at Rs3.203 trillion which is three percent higher than last year’s revised estimate. According to Invest Capital Research’s report, against an estimated revenue generation of Rs 2.381 trillion, the budget deficit for FY13 would be at Rs1.185 trillion (5.0 percent of the GDP).
However, inclusion of Rs80bn owing to NFC award would lower down consolidated fiscal deficit at Rs1,106bn (4.7% of GDP). Gross revenue receipts are estimated at Rs3,234bn (27.5% YoY), which are inclusive of Rs2,381bn estimated to be collected by the FBR.
The tax to GDP ratio is thereby estimated at 10%, which is on the higher side when compared to last year’s revised estimate of 9.5%. Moreover, the total expenditure is estimated to grow by meager 0.6% compared to last year’s revised budget estimate. However, fiscal space is built through lowered current expenditure (14.5% of GDP compared to 16.3% last year revised estimates).
While the deficit target looks encouraging compared to last year’s revised estimate of ~7.4% of GDP, it is equally ambitious to achieve the same given the inherent issues with current expenditures. Funds allocated for current expenditures exceeds 16% to Rs2.3tr this year compared to last budgeted figures of Rs2.1tr, however the current allocation is 4% lower then the revised estimates of last year which shows a high degree of divergence in expenditure estimations by the government.
While the allocation for current expenditure is still highly concentrated towards non-productive, segments such as debt servicing (accounts 39% of total) and defense expenditures (accounts 23% in total). Budgetary allocation for subsidies accounts for Rs209bn (0.9% of GDP) this year compared to last year allocation of Rs166bn (0.8% of GDP). But a bitter side of the subsidy story is that, the original expenditure of last year subsidies exceeded 3x(three times) the budgetary estimates to stand at Rs512bn inclusive of tariff differential subsidies to power sector which accounted for 91% (Rs464bn) of total subsidy expense.
This year target allocation of Rs185 bn for power sector subsidies seems quite conservative as no concrete steps has been yet taken to implement reforms in power sector, failing to comply with targets will pose major risk over economic targets this year
Government has gone aggressive for this year’s PSDP as allocation exceeds by 19% to Rs873bn compared to last year allocation of Rs734bn. The federal and provincial allocation this year exceeds by 19%YoY both to Rs360bn and Rs513bn respectively.
As far as utilization of the allocated amount is concern, during 9MFY12 (Jul-Mar) Gov’t only utilized Rs421bn(57% of original budgeted figure of Rs734bn), how much funds will Gov’t make available to achieve the said target this year is the question still to be answered.
Market still seems to be vary with the post budget developments, whereas provincial budgets still to be announced are keeping the investors upbeat.
However, as major announcements of this budget are already priced in, capital markets are expected to rally with developments on PSDP expenditures related to infrastructure developments, Iran-Pakistan or TAPI pipelines, privatisation proceeds and most importantly monetary view of SBP over aggressive expenditure targets of the government.

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