ISLAMABAD – Due to a substantial shortfall in tax collection and rise ininterest payments, Pakistan’s budget deficit is likely to reach a recordPKR 2.7 trillion in the current fiscal year worth as much as 7% of thegross domestic product (GDP).
Earlier, the government had revised the upper limit of the deficit to PKR2.39 trillion, 6.3% of the GDP against a target of 5.1% for the currentfiscal year. The deficit is expected to exceed PKR 2.24 trillion making itthe highest ever recorded.
Since the deficit is expected to rise, it is safe to say that the twomini-budgets have failed, as a rise in interest payments and a shortfall intax collection are equal contributors to this. The FBR recorded a shortfallof PKR 345 billion as it has collected PKR 2.995 trillion against a10-month target of PKR 3.35 trillion and it is highly unlikely to collectPKR 4.398 billion – the target for the current financial year.
Whilst expenditures continue to rise, the interest payment has been revisedby the government to PKR 2 trillion. This has been done by the financeministry owing to the depreciation of the Rupee. When the budget for thecurrent fiscal year was set, the government had set aside PKR 1.62 trillionfor interest payments.
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Solely due to the devaluation of the rupee, the government will have to payan extra PKR 380 billion in interest payment; Dollar had reached a recordPKR 142 last month against Pakistani Rupee as compared to PKR 115 in Aprillast year.
