The fiscal deficit in the current fiscal year may reach the level the PML-N inherited in 2013 - 8.5 percent - unless a mini budget is unveiled to meet the growing revenue shortfall coupled with a rising expenditure bill compared to what was budgeted. This was the outcome of an anecdotal survey of economists and analysts. However sources in the finance ministry flatly dismissed the possibility of a mini-budget maintaining that it was not under consideration at any level and added that a mini budget is certainly not any government's preference during the last year of its tenure as it is simply politically inexpedient. However they acknowledged that the economy did not appear to be the priority of the Abbasi administration given the uncertain political situation.
The government closed last fiscal year at 5.8 percent fiscal deficit against the upward revised target of 4.3 percent - an indication of the trend of fiscal indicators. An increase of across the board one percent in sales tax was announced by Ishaq Dar in June 2013 to generate additional revenue. In the subsequent fiscal year of 2013-14, a mini budget of Rs 150 billion was unveiled, followed by Rs 40 billion mini budget in 2015-16 and Rs 20 billion mini budget in 2016-17.
A senior official on condition of anonymity said that the fiscal deficit is a major challenge for the government and attributed the problem to transfer of major resources to the provinces under the 7th National Finance Commission (NFC) Award. The official added that the tilt of resources was shifted away from the federal government to the provinces while responsibilities devolved to the provinces under the 18th Constitutional Amendment are yet to be transferred to the provinces.
He said that there is a need to revisit the NFC and distribution of resources from the divisible pool. The provinces did not generate projected budget surplus during the last fiscal year and the federal government may not be able to unveil mini-budget (taxes) due to political expediency this year, he added. He also acknowledged that there was pressure on the government to revisit the recently imposed regulatory duty on 97 new items and an increase in duty on 713 items to discourage imports, expected to generate Rs 25 to 30 billion while the pressure to generate revenue to finance the export package remains which is estimated at Rs 47 billion.
An official of finance ministry stated that it will be a challenge to limit the fiscal deficit during the current fiscal year without taking additional taxation measures given the ambitious Federal Board of Revenue (FBR) target of Rs 4013 billion and an expected rise in spending with the inset of elections.
Copyright Business Recorder, 2017