M Zahid Rifat
CURRENT year 2017-18 is last year of the stipulated constitutional five-year tenure of the present federal government. It is good to note that it is off to a good start as for as continuation of its good economic performance and has ended the first quarter July to September 2017 on a positive note due to determined efforts by its economic team. It is appreciable that within less than a fortnight of end of the first quarter of ongoing financial year, the federal government has made facts and figures about the targets and achievements regarding economic growth in order to keep the people updated in this regard. On the basis of provisional figures available from official sources regarding fiscal operations, it can safely be stated that the federal government has closed the first quarter on a strong fiscal performance note.
The overall budget deficit during the just ended first quarter this year is reported to be Rs 324 billion which favourably compares with Rs 438 billion during the same period last fiscal recording appreciable decrease of 26 per cent . Thus the government has managed to bring budget deficit down to 0.9 per cent of Gross Domestic Product (GDP) during July to September 2017 quarter from 1.3 per cent in the same period of 2016-17. This was made possible through robust tax collections by revenue generation agencies and lower expenditure.
Reduced fiscal deficit means lower public debt accumulation which supports alignment to the targets in the recently amended Fiscal Responsibility and Debt Limitation Act. However, it may also be mentioned here that if the provinces had not generated between themselves surplus of Rs 70 billion during the period under review, the budget deficit might have hiked to 1.1 per cent of GDP in the just ended quarter. The provinces had thus helped the federal government to reduce the budget deficit by 0.2 per cent of GDP.
Federal Board of Revenue (FBR) is the main revenue collection and generation of the federal government. Its good performance brings smiles on the faces of those treading the corridors of power and sends notes of concern and disappointment when fails to achieve the set targets. According to the provisional data available, the tax collections by the FBR remained robust during the period under review. Total tax collections of as much as Rs 765 billion has commendably demonstrated growth of more than 20 per cent as compared to the collection figures of Rs 625 billion in the same period of the last financial year.
Due to higher tax collections, the amounts transferred to the provinces of Punjab, Sindh, Khyber Pukhtoonkhwah and Balochistan out of the divisible pool of taxes and duties collected by the federal government also increased substantially. As compared to last year’s first quarter transfers of Rs 416 billion, this year the total transfers to the provinces have already reached the level of Rs 570 billion, as much as Rs 154 billion more.
On the expenditure side, the federal government maintained strict fiscal discipline, which produced good results. As against total expenditure of Rs 914 billion during the first quarter of 2016-17, the federal government spent 894 billion in the first quarter of current financial year despite the fact that increased investment was made through the development budget. Debt servicing consumed Rs 394 billion in the first quarter of current fiscal and remained the largest consuming head on the expenditure side followed by defence spending of Rs 177 billion.
The utilization of development funding on account of financing of the Public Sector Development Programme (PSDP) stood at Rs 84 billion indicating accelerated developmental activities in just ended first quarter showing utilization of Rs 20 billion more as compared to last year’s first quarter spending figures of Rs 64 billion. Despite this overall good performance during the period under review, some economic experts believe that rigidities on both revenue generation and expenditure sides may continue to haunt the economic team members of the federal government making it somewhat tough to achieve the desirable budget deficit target of 4,1 per cent of GDP envisaged for the entire financial year 2017-18.
While appreciating inflation containment, lower interest rates, positive and strong growth in large scale manufacturing, recent upward trend in exports as well remittances back home of Pakistani expatriates, it is hoped and expected that same growth tempo will also be maintained during the remaining three quarters to successfully achieve the targets fixed for entire financial 2017-18 keeping in the economic growth momentum of last four years. Needless to state that maintaining focus on acceleration of economic growth will ensure continued gradual reduction in unemployment and poverty to which the federal government is committed. The federal government through its team of economic managers has managed to close first quarter of financial year 2017-18 on positive strong fiscal performance making a good beginning and this appreciable tempo must be maintained to achieve still better results on the economic growth front against all odds.
— The writer is a freelance based in Lahore.
M Zahid Rifat