Budget deficit hits six-year high at Rs1.03tr.

Byline: Shahbaz Rana

ISLAMABAD -- The budget deficit hit a six-year high at Rs1.03 trillion, or 2.7% of the total size of national economy, in first half of the current fiscal year due to a double-digit growth in defence and debt spending, and negligible improvement in revenues.

The budget deficit in the first half of FY19, when the Pakistan Tehreek-e-Insaf (PTI) came to power, was worse than the deficits recorded in the July-December period of previous years, when Pakistan Muslim League-Nawaz and the Pakistan Peoples Party were in power.

Debt and defence spending consumed Rs1.36 trillion or 61.2% of the total federal expenditure, according to the Ministry of Finance. The development spending stood at just Rs183 billion or 8.4% of the total federal spending.

The budget deficit widened despite over 27% squeeze on federal development spending by the PTI government in July-December of the current fiscal year, according to a consolidated summary of federal and provincial budgetary operations.

The overall gap between expenditure and income during the July-December period was equal to 2.7% of gross domestic product (GDP). In absolute terms, the budget deficit in the first half widened to Rs1.03 trillion, higher by almost 30% over the corresponding period of previous year. In terms of national output, it was the highest deficit recorded for the first half in the past six fiscal years. Last time, during the July-December period of FY13, the budget deficit had been recorded at 2.6% of GDP. Pakistan had closed the year with a record deficit of 8%.

The deficit ballooned to Rs1.03 trillion despite a reduction of about Rs87 billion in development spending against the ceiling approved by the National Economic Council (NEC). As per NEC limits, the development spending should have been Rs270 billion in the first half, but the actual federal development spending stood at Rs183 billion. It was 27.7% less than the comparative period of the previous fiscal year.

The development spending was also Rs42 billion less than the releases sanctioned by the Ministry of Planning, suggesting that the Ministry of Finance was not honouring it.

The budget deficit widened despite the fact that the four provinces showed a cash surplus of Rs247 billion in the first six months. Excluding provincial savings, the federal budget deficit jumped to Rs1.3 trillion or 3.32% of GDP in the first half.

The trend suggests that the overall annual budget deficit target of 5.1% of GDP or...