Budget deficit narrows to Rs2222 billion in 10 months.

ISLAMABAD -- Pakistan's budget deficit was recorded at 5.3 percent of the GDP (Rs2222 billion) in ten months (July to April) of the current fiscal year.

The ministry of finance in monthly Economic Update has noted that fiscal deficit reduced to 5.3 percent of GDP (Rs 2222 billion) during July-April period of FY2020 against 5.6 percent of GDP (Rs 2128 billion) last year. Meanwhile, primary balance posted a deficit of Rs 205 billion (-0.5 percent of GDP) against the deficit of Rs 546 billion (-1.4 percent of GDP) last year. 'The advent of COVID-19 pandemic towards the end of third quarter of current fiscal year brought significant challenges for the fiscal sector to improve further,' the ministry noted.

Budget deficit is expected to swell in May and June due to the Covid-19 situation in the country. The government had already projected that Pakistan's budget deficit would swell to 9.6 percent of the GDP due to closure of businesses and restricted economic activity due to the lockdown situation. However, the government would reduce it to 7 percent of the GDP in next fiscal year.

According to the Economic Update, during July-April, FY2020 Rs 2,222 billion has been financed from external and domestic sources to cover deficit. An amount of Rs 837 billion or 2 percent of GDP has been financed from external sources. Similarly, Rs 1,384 billion or 3.3 percent of GDP has been financed from domestic sources.

The outbreak of COVID-19 has adversely affected Pakistan's economic growth for FY2020. Pakistan's domestic production and exports declined for decrease in global demand and commodity prices. The slowdown left adverse impact on tax and non-tax revenues; whereas government spending has overrun. However, drop in crude oil prices has reduced the current account deficit and eased out inflationary pressure. The government is utilizing all resources to provide maximum relief to the public. Economic Stimulus Package, Ehsas Emergency Relief Programme, incentive package for SMEs and reduction in petroleum prices, will provide multidimensional positive impacts to all segments of society especially poor families.

The Economic Update stated that coronavirus would result in tax collection shortfall of Rs900 billion. The tax collection target of Rs 4,807 billion, revised to Rs 3,908 billion due to economic slowdown. During July-May, FY2020, FBR tax collection posted a growth of 6.6 percent and reached at Rs3,527.3 billion against Rs 3,310.1 billion in the...