Islamabad [Pakistan], May 2 (ANI): Pakistan’s Ministry of Finance (MoF) issued a warning regarding the escalating fiscal pressures driven by a substantial 54 per cent increase in interest payments, leading to the country’s fiscal deficit widening to 3.7 per cent of GDP in the first nine months of FY24, Dawn reported.
Describing the situation, the ministry stated, “A significant challenge arises from the growing pressure on expenditures, primarily driven by higher markup payments. This has caused the fiscal deficit to widen,” in its Monthly Economic Update & Outlook for April.
During the same period, fiscal operations revealed that the deficit had expanded to PKR 3.9 trillion (3.7 per cent of GDP) for July-March of 2023-24, marking a nearly 27 per cent surge compared to last year’s PKR 3.078 trillion (3.6 per cent of GDP).
The substantial jump in interest payments to PKR 5.52 trillion from PKR 3.58 trillion in the corresponding period last year contributed significantly to this widening deficit. Consequently, markup payments rose to 5.2 per cent of GDP by the end of March from 4.2 per cent the previous year.
Despite acknowledging “some positive developments” in fiscal performance due to robust revenue growth, the MoF conceded that “growing pressure on expenditures due to higher markup payments presents significant challenges for fiscal management.”
The government appeared to be gearing up for further stabilisation in the upcoming budget within the IMF program, emphasising the need for fiscal consolidation to pave the way for sustainable economic growth.
The ministry stated, “It is imperative to ensure fiscal consolidation, to lay the foundation for progressing towards higher and sustainable economic growth. Therefore, the government is stringently focusing on fiscal consolidation measures to ensure fiscal discipline.”
However, amid mammoth windfalls from record interest rates and petroleum levy, the government managed to achieve a healthy primary surplus. The State Bank of Pakistan’s surplus profit surged by a staggering 162 per cent to PKR 972 billion in the first nine months of the current year, compared to PKR 371 billion in the same period last year.
Similarly, the petroleum levy soared to PKR 720 billion, just shy of the full-year target, exhibiting a 99 per cent increase over last year’s PKR 362 billion. Consequently, total non-tax revenue (NTR) surged to over PKR 2.52 trillion, a 91 per cent increase from last year’s PKR 1.3 trillion, leading to an improvement in the primary balance surplus.
Total revenue for the first nine months witnessed a 41 per cent increase to PKR 9.78 trillion, with tax revenue rising by 29 per cent to PKR 7.26 trillion. Federal revenue grew by approximately 30 per cent to PKR 6.7 trillion, while provincial revenues saw a 19 per cent increase to PKR 551 billion.
In contrast, total expenditure surged by 37 per cent to PKR 13.7 trillion by the end of March compared to PKR 10 trillion the previous year. Besides the 54 per cent increase in interest payments, defence expenditure rose by 22 per cent to PKR 1.222 trillion.
The development sector bore the brunt of these fiscal pressures, with its share dropping at the expense of public welfare. Although total development expenditure increased by 8 per cent to PKR 1.16 trillion, its share of GDP decreased to 1.1 per cent compared to 1.2 per cent the previous year. Federal development spending plummeted to PKR 270 billion from PKR 294 billion during the same period last year, Dawn reported. (ANI)
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