Expectations subdued as fiscal gap set to widen by 6.8pc in FY13

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KARACHI - During 9MFY13 the overall revenue base of the government grew by 22%YoY to Rs2.125 trillion. The tax revenue on the other hand improved by a nominal 11%YoY to Rs1.528 trillion and non-tax revenue increased by a massive 62%YoY to Rs597bn.


“The massive increase in non-tax revenue is due to the inflow of $1.9bn in the form of Coalition Support Fund (CSF) during the period,” viewed Abdul Azeem, an analyst at InvestCap Research.

The government set the initial target for total tax revenue at Rs2.381tn however the same was revised downwards three times during the period having now reached to Rs2.116tn. Moreover, with the initial expenditure target of Rs3.203tn, the fiscal balance was budgeted at a deficit of Rs1.105tn or 4.7pc of the GDP. During the last five years, Azeem said last quarter of the fiscal year remained the worst as compared to other quarters of the years.

“The trend reveals that average fiscal deficit hovered around 2.3% of GDP during the last quarter of the fiscal year as compared to 1.4% during the remaining three quarters,” he added. The higher realization of expenditure of 6.8% of GDP as compared to 4.4% during remaining three quarter of the year has been the main concern behind the rise in fiscal deficit, he said.

During 9MFY13, the government has repaid the amount of Rs772bn on account of debt servicing, 3.3% of GDP, as compared to Rs624bn or 1.7% of GDP in the same period last year. In addition to this, the government has also provided Rs315bn in the form of subsidy till May, 17 this year. The new government is expected to take oath during May, it is therefore unlikely that the gov’t will be able to bring any abrupt improvement given the prevailing situation on the revenue front for FY13.

“However, some constraints are yet to be seen on the expenditure front during the last quarter as the caretaker government has stopped the funds for different ongoing projects,” said Azeem.

Incorporating all developments, the deficit figure is still expected to touch 6.8pc of the GDP, higher than the target of 4.7% for FY13, the analyst said.

Courtesy:  pakistan today


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