2005 to 2010: fiscal deficit targets remained elusive

Finance Ministry has conceded that it failed to achieve fiscal deficit targets pronounced in the budget speeches of Finance Ministers for the last five consecutive financial years (from 2005 to 2010). Official documents reveal that the Finance Ministry had projected 3.8 percent fiscal deficit for the fiscal year 2005-06 but the revised figure was 4.3 percent , a deviation of 11 percent (as percentage of GDP).
In 2006-07, fiscal target was 3.7 percent and the achievement was 4.3 percent, 15 percent variation from the actual target. According to the documents, the worst financial year was 2007-08 when the fiscal deficit touched 7.6 percent as percentage of GDP against the target of 4 percent, showing a deviation of 47 percent.
In 2008-09, fiscal deficit target was 4.7 percent but the government achieved fiscal deficit of 5.3 percent as percentage of GDP, showing difference of 12 percent when compared with the actual target. Two financial years ie 2005-06 and 2008-09 were comparatively better with reference to management of fiscal deficit in comparison to the other years. In 2009-10, fiscal target was projected at 4.9 percent of the GDP but the actual achievement was 6.3 percent showing 23 percent above the target.
The fiscal target for current fiscal year was 4 percent of the GDP but the Finance Ministry has indicated that it would touch 5.5 percent, again showing a significant deviation from the target. Finance Ministry argues that in some cases the revenue projections present desired optimism while on the other the government finds it difficult to control expenditure.
The disappointing revenue performance of Pakistan is the principal factor impacting on the budget. With the tax revenue as a proportion to GDP stuck at a very low level( below 10 percent) and in the absence of political will to raise this level, the options are narrowing year by year.
Analysts maintain that the most appropriate solution for the impending budgetary difficulties would be a major push on the revenue side of the budget, to raise the tax/ GDP ratio from below 10 percent to 12 percent or 15 percent over the next two to three years. However, in spite of the regularity with which such targets have been set both domestically and in the context of Stand By Arrangement with the IMF, the political consensus on revenue mobilisation has been lacking.