The federal government may be compelled to borrow, domestically, in the event the federal Board of Revenue (FBR) fails to achieve the uphill task of collecting over Rs 116 billion in the remaining two days of the current fiscal year, sources told Business Recorder.
The FBR may be unable to achieve revenue collection target on account of recovery of stuck up arrears in the event that parties may obtain stay order from courts. An official said that collection of over Rs 116 billion in the two days remaining is a challenging task for the tax collecting machinery, and any shortfall may be met through borrowing to keep the fiscal deficit below 6 percent.
The government's appetite to borrow from domestic banking system has led to the rise from the 2010-11 budgetary allocation for servicing of domestic debt from Rs 621 billion to Rs 653 billion. This reliance, economists say, is highly inflationary and accounts for the double-digit inflation which is believed to have pushed more people below the poverty line.
The recent amnesties on sales tax, income tax and customs duty are an indication that the Board is facing difficulty in meeting the collection target by June 30, 2011. The recovery of income tax is only possible if ample opportunity for filing of returns or amended returns under the provisions of the income tax law is extended.
Sources said that borrowing from the banking system was crowding out private sector's investment. In addition, high interest rate maintained by the State Bank of Pakistan (SBP) to check inflation was also adversely affecting private investment. The shortfall in revenue collection is a phenomenon every year primarily because of high projection in the budget. The shortfall in revenue collection for the current fiscal year would also have an impact on revenue base of Rs 1588 billion and failure by the FBR to achieve Rs 1588 billion would also make unrealistic budgetary projection of revenue target of Rs 1952 billion for the coming fiscal year.
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