Budget borrowing almost doubles – Journal

KARACHI: Despite a massive increase in revenue collection, government budget borrowing increased by more than 186% in the first 11 months of the outgoing fiscal year.

The latest data released by the State Bank of Pakistan showed that federal government budgetary borrowing soared to 2,488.5 billion rupees during 11MFY22 from 868.4 billion rupees in the same period of the year last.

Tax collection by the Federal Board of Revenue (FBR) also increased to Rs 5.349 trillion in 11MFY22. Compared to Rs4.164tr in the corresponding period of 2020-21, a growth of 28.5% in the July-May period. However, collection fell short of the planned target of Rs 18 billion.

According to an official report in the first 10 months, FBR exceeded its revenue target by 5.2%. Despite massive tax breaks, including a zero sales tax on oil and some other essentials, tax authorities have managed to collect higher revenue.

Further details showed that the government borrowed a lower amount of Rs 2,231.9 billion from banks during 11MFY22 for fiscal support compared to Rs 2,577 billion in the same period last year.

However, despite a 28.5% higher revenue collection which generated an additional Rs 1.185 billion during 11MFY22, expenditure was even higher which forced the government to borrow an additional Rs. 1.62 trillion for budget support over the period.

In FY22 July to March, the budget deficit was recorded at 3.8% of GDP (2,565.6 billion rupees) compared to 3% (1,652 billion rupees) in the comparable period from last year. Similarly, the primary balance posted a deficit of Rs 447.2 billion against a surplus of Rs 451.8 billion during the period under review.

However, the budget deficit for the whole of FY22 was estimated at 8.6%. Finance Minister Miftah Ismail in his budget speech said the government would target a budget deficit of 4.9% of GDP for 2022-23.

He further said that the government will prevent tax evasion which will help raise revenue by 20% to Rs7tr in 2022/23 and reduce the budget deficit.

A report from the Ministry of Finance indicated that an increase in the deficit was observed due to the increase in expenditure due to the increase in grants and donations.

Posted in Dawn, June 19, 2022

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