In the fiscal year 2020-21, the budget deficit should be 7 to 7.5 % of GDP

In the fiscal year 2020-21, the budget deficit should be 7 to 7.5 % of GDP

Because of revenue shortfalls and increased expenditure, the Initially anticipated Pakistan deficit budget is around 7.5 percent of GDP, compared to the reduced objective of 7 percent for the last financial year 2020-21. The budget deficit gives the difference between the total receipts and expenditures of the country. Since the PTI took control in Pakistan, it has remained above 8% of GDP. Because domestic and external borrowings are financed, the deficit is seen as an inadequate warning for the economy of the country.

Initially calculated our budget deficit at roughly 7.5 percent of GDP, or Rs3.41 trillion, against a reduced objective of 7 percent of GDP, or Rs3.1 trillion, for the fiscal year 2020-21, which concluded on June 30, 2021,” top government sources disclosed to The News on Monday. The finalized provisional budget deficit estimates will be announced soon, and it is expected to be around 7 to 7.5 percent of GDP for the previous fiscal year. It would be substantially determined by three significant factors: the use of development funds, income surpluses generated by provinces, and statistical discrepancy-related numbers.

Particularly the primary deficit, is a sacred figure in the IMF program for assessing the economic soundness of any loan recipient country. For the fiscal year 2020-21, the primary deficit was expected to remain negative by 0.5 percent of GDP. The budget deficit remained significant during the last three years PTI was in power, totaling Rs3,444 billion or 8.9% of GDP in the fiscal year 2018-19. For the fiscal year 2019-20, the budget deficit was Rs3,375 billion, or 8.1 percent of GDP.

In absolute terms, the deficit was Rs3.417 trillion, or 7.5 percent of GDP, the second-highest in the last three years. With a revenue surplus of Rs570 billion generated by provinces, the government hopes to reduce the budget deficit to Rs3.42 trillion for the current fiscal year 2021-22. Therefore, the sections have only forecast peanuts, with a surplus of a few billion rupees, so the center of the projection in the budget documents has already been shattered. Without a provincial revenue surplus, the federal budget-deficit might rise to Rs4 trillion, or Rs3,990 billion, in 2021-22.

For the first three quarters (July-March) of the previous fiscal year, the budget of the country deficit was Rs1,652 billion, or 3.6 percent of GDP. During the first nine months of the current fiscal year, the primary balance was positive 1% of GDP.

For the fiscal year that concluded on June 30, 2021, the deficit is about to rise to roughly 7.5 percent of GDP. The deficiency of the budget of Pakistan could be into a 40:60 ratio in the first and second halves in any fiscal year. The deficit was 2.5 percent of GDP in the first half of the previous fiscal year (July-December), but it remained high, hovering at 7.5 percent of GDP as of June 30, 2021.

 

The FBR collected Rs4,732 billion in taxes, compared to a target of Rs4,963 billion set in the budget documents for 2021-22, resulting in an Rs231 billion shortfall. The Ministry of Finance expected the provinces to earn a revenue surplus of Rs242 billion. It would be crucial to keep the deficit under 7.5 percent of GDP; else it might spiral out of control. Under the PTI-led administration, the deficit will undoubtedly be less than 8% of GDP for the first time in the last three years, the official concluded.

Read more: Pak-China relations are not bound to the CPEC project

 

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