ISLAMABAD – The fiscal deficit was recorded at 0.9 per cent of grossdomestic product (GDP) during the first two months of the current fiscalyear against the deficit of 0.7 per cent of GDP during the correspondingperiod of last year.
According to the monthly Economic Update and Outlook October 2022 releasedby the Ministry of Finance, the fiscal deficit during July-August (2022-23)was recorded at Rs.672 billion against the deficit of Rs.462 billion duringJuly-August (2021-22).
Meanwhile, according to the outlook, the primary balance posted a deficitof Rs.90 billion in July-August FY2023 against the deficit of Rs37 billionin the comparable period of last year.
In the first two months of the current fiscal year, net federal revenuesgrew by 12.3 per cent to Rs 528 billion as compared to Rs 470 billion inthe same period of last year.
The growth has been realized on the back of an increase in both tax andnon-tax revenues. On the other hand, total expenditures increased to Rs1320 billion in July-August FY2023, up from Rs 1104 billion in the lastyear, posting a growth of 19.6 per cent. The provisional net tax collectionin September FY2023 stood at Rs 684.8 billion against Rs 534.0 billion inthe same month of last year, posting a growth of 28.2 per cent. Thus, thefirst quarter of the current fiscal year ended up with a growth of 17.0 percent with a net tax collection of Rs 1633.9 billion against Rs1396.4billion in the comparable period of last year.
Similarly, the target for the first quarter has also been surpassed byRs24.4 billion. Within total tax collection, direct taxes posted a healthygrowth of 41.8 per cent followed by FED at 11.6 per cent and customs at 5.1per.
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Meanwhile, according to the report, the trade balance of Pakistan isexpected to improve in the coming months on account of import contractiondue to a deceleration in domestic economic activities and aggregate demand.
“Overall economic outlook shows an optimistic picture of the economicperformance in the coming months. The CPI inflation is declining, the rupeehas gained stability, and the current account balance is on improvingtrend. These development indicate that economic activity will remainpositive and persistent in coming months”, the report added.
It said for the future path of inflation, the exchange rate is of utmostimportance. Moderating inflation also contributes to exchange ratestability, which in the benign case may generate a virtuousinflation-exchange rate cycle. Further, exchange rate stability requiressound economic fundamentals.
Besides inflation, also a manageable current account deficit and guaranteedfinancing of this deficit by healthy financial inflows are required. Whenmarkets get convinced about these prospects, speculative bubbles in theexchange market would be highly unlikely.