Thursday, July 7, 2022

Pakistan: Deficit down by 2% YoY in 9MFY21


Pakistan’s fiscal balance in the current fiscal year to date has strengthened over prior year, with the deficit arriving at PKR 1.65trn in 9MFY21 (3.6% of GDP) compared to PKR 1.69trn in 9MFY20 (3.8% of GDP), down by 2% YoY. Moreover, the primary surplus during the period at PKR 452bn (1.0% of GDP in 9MFY21) fares better compared to a primary surplus of PKR 194bn witnessed last year (0.4% of GDP).

Primarily, total revenue growth at 6% in 9MFY21 to PKR 5.0trn (9MFY20: PKR 4.7trn) aided the fiscal balance, translating into 11.0% of GDP vs. 10.7% last year. The total tax revenue collection has gone up by 5% YoY to PKR 3.8trn. Indirect taxes (+13% YoY to PKR 2.15trn), sales tax (+14% YoY to PKR 1.42trn), and direct taxes (+9% YoY to PKR 1.25trn amid a higher number of taxpayers) contributed to the overall collection.

In addition, the government collected PKR 1.17trn in non-tax revenues, displaying a jump of 13% YoY. This was particularly owed to the imposition of Petroleum Levy, which is now classified under non-tax revenue (+86% YoY | PKR 369bn). On the flip side, the surplus profit of State Bank of Pakistan and Pakistan Telecommunication Authority declined during 9MFY21 to PKR 498bn (-22% YoY) and PKR 20bn (-82% YoY), respectively.

In addition, total expenditures went up by 4% YoY to PKR 6.6trn (14.6% of GDP vs. 14.5% of GDP in 9MFY20). Further breakup revealed that current expenditure underwent an uptick of 8% YoY of which markup payments rose by 12% YoY. On the contrary, the defense expenses went down by 2% YoY to PKR 784bn. Moreover, development expenditure and net lending undertaken by the government declined by 7.5% YoY to PKR 723bn.

Total PSDP expenditure in 9MFY21 arrived at PKR 654bn (-9% YoY) with provincial expenditure at PKR 390bn, outdoing federal disbursement of PKR 264bn.

The decline of 26% YoY in deficit during 3QFY21

Analysts at Arif Habib Limited (AHL) highlighted cumulatively all four provincial governments recorded an overall balance of PKR 413bn during 9MFY21, compared to PKR 344bn recorded in the corresponding period last year, marking a 20% increase. However, Sindh and KPK recorded a decline of 10% YoY and 70% YoY, respectively.

Pertinently, the budget deficit during 3QFY21 settled at PKR 514bn (1.1% of GDP), depicting a decline of 26% YoY vis-à-vis PKR 691bn during 3QFY20.

Total revenues of the government in 3QFY21 arrived at PKR 1.64trn (3.6% of GDP), up by 13% YoY from PKR 1.46trn during 3QFY20.

FBR taxes increased by 25% YoY to PKR 1.18trn due to a 15% YoY rise in direct taxes to PKR 416bn in 3QFY21 whereas collection from sales tax and indirect taxes went up by 30% and 39% YoY to PKR 498bn and PKR 769bn, respectively.

Total expenditure in 3QFY21 clocked in at PKR 2,156bn (4.7% of GDP), up 0.3% YoY over the same period of last year (PKR 2,149bn; 4.9% of GDP) with a 9% rise in defense expenditure to PKR 297bn and 9% uptick in current expenditure to PKR 2.1trn.

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