Fiscal blowout as deficit jumps to 5pc, revenues flat
In the Pakistan Tehreek-iInsaf's first year in office, the country's fiscal deficit in first three quarters (July-March) of the current fiscal year peaked to five per cent of GDP as expenditures broke past records and revenue performance was the lowest almost in a decade.
The details of fiscal operations released by the ministry of finance on Tuesday put the country's nine-month total fiscal deficit at Rs1.922 trillion - the highest 3rd quarter deficit recorded in a decade, which is the time period for which data is maintained on the ministry's website. It was Rs1.48tr in the same period last year.
All major fiscal indicators - both on expenditure and revenue side - showed a marked deterioration across the board. There appeared to be no control on runaway expenditures as revenue collection turned flat. The dismal outturn in the data will put more pressure on the government to show a strengthened revenue mobilisation effort, as well as a stronger will to contain expenditures in the budget that is expected to be announced in early June.
The data shows a sharp spike in the deficit in the third quarter, which runs from January to March 2019, of about Rs900bn or 2.3pc of GDP. The figure is only slightly smaller than the deficit of the first two quarters, running from July to December 2018, combined. For the first two quarters, the total deficit was Rs1.02tr or 2.7pc of GDP. The deficit jumped despite a steep fall of 34pc in development spending in the first nine months of the fiscal year.
The highest full year fiscal deficit since 2000 was recorded at 8pc in fiscal year 2012-13 and even that year, nine-month gap between revenue and expenditure had amounted to 4.4pc of GDP, according to the ministry of finance data.
Mark-up payments in first nine months this year were reported at 3.8pc of GDP - the highest since 2009 - compared to 3.4pc in the same period last year. In absolute terms, an amount of Rs1.459tr was spent on mark-up payments this year compared to significantly lower debt servicing of Rs1.172tr last year. Interest rates nearly doubled in this period and the rupee has seen a sharp devaluation as well. Both developments would raise mark-up costs for the government, in addition to fresh borrowing.
Defence spending picked up pace sharply in the third quarter, coming in at 2pc of GDP in nine months, when there is no precedent for defence spending going beyond 1.9pc of GDP even for the full year, in the past 11 years.