The Fiscal Performance At Risk

Published Date: 02 Nov 2017

Fiscal Performance-2010

The fiscal developments during year 2010 have weakened the fiscal performance of the country in the previous years. A rise in fiscal imbalances throughout the year has been a major failing of the economy. During the year tensions were placed on budgetary resources by subsidies, defense related spending, and debt servicing increased, whereas foreseen increases in revenue collection failed to happen. Due to high fiscal deficit and no adjustments in development expenditure through out the year, has put the fiscal performance at risk.

The behavior of revenue and expenditure in the following year are discussed below.

Revenue

The primary focus of government in the year was to improve the tax taste in the country and the firm decision was made to increase the revenues.

Total revenue for Fiscal year-2010 was Rs. 2,078.2 billion, up by 12.3 percent over the fiscal year 2009. A shortfall of Rs. 77.2 billion was seen against the budgeted estimates. Tax revenue registered a growth of 22.3 percent, adding Rs. 1,472.8 billion to the revenue side in 2010. However, this head deviated from the original budget by 5.8 percent. Federal Board of Revenue was not able to meet the target of Rs. 1,380billion and fell short by Rs. 52.6 billion.

Non‐tax revenue exhibited noticeable performance primarily owing to SBP profits by attaining above budget inflows during the fiscal year 2009‐10. Rs. 605.4 was collected which is lower by 6.3 percent against the 2008‐09 receipts. However, this healthy growth of 2.3 percent over original projections mitigated the impact of tax revenue shortfall to some extent in the context of meeting budget targets.

Provincial performance in mobilizing revenues was not up to the mark as they collected Rs. 122.7 billion that was short by Rs. 42.3 billion against the estimated revenue.

Expenditure

As originally envisaged in budgetary targets for FY2009‐10, enhanced revenue generation would be usedto fuel additional outlays on socio‐economic development and social protection. Containment of currentexpenditure was targeted in order to keep the fiscal deficit at sustainable level. However, thegovernment witnessed massive slippages against the budgeted current expenditure targets, making anadjustment to development spending goals necessary for the third consecutive year.

Total expenditure for 2009‐10 approximated to Rs. 3,007.2 billion; Rs. 129.8 billion above the spendingtargets while the growth over the previous fiscal year remained 18.8 percent. A 13.4 percent slippage onaccount of current expenditure has been the main culprit. The outgoing fiscal year underwent asignificant downward adjustment of 19.6 percent in respect of development expenditure, althoughgrowth in this head has encouragingly been 36.7 percent over 2008‐09.

Fiscal Performance 2011

A total of Rs. 400.2 billion was collected in terms of revenue while Rs. 676.4 billion was the aggregate government spending till September 2010. A revenue shortfall of Rs. 27 billion and an expenditure over run by Rs. 25 billion over July‐September 2009 was observed. The first quarter of the current fiscal yearobserved a budget deficit of 1.6 percent of GDP. A welcome development in this quarter was a 0.3percent (of GDP) budget surplus generated by provincial governments. However, the spill‐over effects offlood spending are to be painfully felt in the coming quarters.

Expenditure

Current spending was Rs. 566.8 billion in July‐September 2010. Interest payments on public debt stockwere higher than in the same period of the preceding fiscal year by 14.1 percent while defence outlaysconsumed Rs. 93.1 billion. Subsidies took away Rs. 65.8 billion with the bulk of it (Rs. 40.4 billion)incurring on power sector, while grants made up 6.7 percent of current expenditure. The share ofprovincial outlays in current expenditure aggregated to 26 percent and this head witnessed an increaseof 5.8 percent over Q1 FY2009‐10. This modest surge nullified, to some extent, worries arising out of amismatch due to a combined effect of 7th NFC Award and 18th Amendment (discussed in the relevantsections before).

On the other hand, public investment levels have declined sharply as only Rs. 43.1 billion was spent on

Public Sector Development Programme (PSDP) against Rs. 85.5 billion in July‐September 2009. This hugereduction reflects the government’s plan to divert a significant part of PSDP to relief and rehabilitationactivities. Despite international assistance and large‐scale public mobilization, government is left withinadequate resources to meet increasing needs on this front. Hence, the government has initiated atightening of development expenditure to effectively manage this mammoth task. Although limitedpolicy options are available to the government to adjust to one‐off and urgent needs on budgetaryresources, the shrinkage in social sector outlays is not at all a desirable course of action. In contrast tothis fiscal trend, fundamental structural changes are necessary to instill flexibility in public spending soas to create space for temporary demands on government’s sparse funds.

Fiscal Performance2011-12

Total expenditure of Rs. 3721.2 billion was estimated for the full year, comprising of Rs. 2976.3 billion of current expenditure (80% of total), and Rs. 744.9 billion of development expenditure and net lending (20 % of total).

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During July-March, 2011-12 total expenditures amounted to Rs 2641.9 billion against Rs 2262.6 billion in the same period last year.

Current expenditures stood at Rs 2154.1 billion and development expenditures and net lending recorded at Rs 428 billion during July-March,

2011-12.

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Total revenues reached to Rs 1747.0 billion during July-March, 2011-12 against Rs1495.3 billion in the same period of last year.

Within Revenues tax revenues stood at Rs 1379.2 billion including Rs. 1,321.5 billion of Federal and

Rs 57.6 billion of provinces, and non-tax revenues remained at Rs. 367.9 billion during the same period of fiscal year 2011-12.