Sources on condition of anonymity stated that fiscal deficit will be around 6.3 percent this year, against the budgeted 4.3 percent. The Federal Board of Revenue (FBR) tax collection is expected to remain below target by Rs 150 billion despite claims that Rs 4013 billion target for the current fiscal year will be achieved. Sources added that expecting provinces to generate Rs 347 billion budget surplus during an election year is unrealistic and termed the International Monetary Fund (IMF) projection of 5.5 percent fiscal deficit for the current fiscal year ''quite lenient''.
Sources further stated that any increase in the budgeted debt servicing is a foregone conclusion due to heavy reliance of the government on commercial borrowing to preserve foreign exchange reserves, which have been depleting in recent months due to rapid increase in current account deficit.
The power sector''s subsidies are expected to increase significantly in summer as the expected increase in demand would compel the government to run inefficient power plants to reduce the hours of load shedding, sources said adding that load shedding has begun to spike. This will increase the quantum of subsidies on account of tariff differential.
Sources said there are some Gencos with operating capacity of as low as 29 percent and are oil guzzlers, but the precise amount of subsidy would depend on the international price of oil and may be double that budgeted for the current fiscal year. The government will have to inject Rs 8-10 billion per month as subsidy to run inefficient and oil consuming Gencos to make full use of installed capacity to deal with the expected load shedding.
Sources added that slashing development expenditure during elections is out of question and this is evident from the fact that the entire fiscal year''s allocation of Rs 30 billon for Prime Minister''s Taraqiati Programme was released in one go to parliamentarians in October 2017 to ensure completion of development project in their constituencies well before elections.
Sources further contended that the government is unlikely to impose higher taxes on productive sectors during an election year and added that the total number of filers had declined compared to the previous fiscal year. It is unlikely that FBR would proactively proceed against those influentials who refuse to file returns.
Increase in expenditure and shortfall in revenue as well as inability of the provinces to give budget surplus of Rs 347 billion is expected to increase the fiscal deficit beyond 6 percent, sources concluded.