First quarter uplift, expenditure: Rs 60 billion saving helps contain fiscal deficit

The government has saved Rs 60 billion by managing development and current expenditure during the first quarter (July-September 2011-12), of the current fiscal year, it is learnt. Sources said saving of Rs 60 billion helped the economic managers contain the fiscal deficit to 1.1 per cent of GDP for the first quarter of the current fiscal year.
The government saved Rs 25 billion from Public Sector Development Programme (PSDP) as it released Rs 50 billion against the target of Rs 75 billion. It saved Rs 35 billion from curtailing current expenditure on various heads. Rupees 16 billion were saved by managing expenditure on account of grants and subsidies following Rs 180 billion releases against the target of Rs 196 billion during the first quarter of the current fiscal year.
An official of the finance ministry claimed that considerable saving was also achieved on account of defence expenditure. Moreover, Rs 9 billion were saved from interest payments following 50 basis points cut in policy rate by the State Bank of Pakistan that helped reduce interest payment to Rs 177 billion against the target of Rs 186 billion for July-September 2011-12.
All this helped bring down the budget deficit to 1.1 percent of the Gross Domestic Product (GDP) or Rs 232 billion for the first quarter by managing expenditures to Rs 514 billion against the target of Rs 574 billion. The total tax revenue for the first quarter stood at Rs 376 billion while non-tax revenue in the form of petroleum levy at Rs 117 billion.
A top government official said GDP growth rate for the current fiscal year is expected to decline by 0.5 per cent following damage to crops in Sindh and exert pressure on infrastructure and consequently on public finance and power sector management, hence the basic focus of the government would be on austerity and governance.
About the IMF programme, the official said although the situation is difficult, yet it is manageable and engagement with the Fund would continue. Not being in the formal programme does not mean liberty on the fiscal side. The government would pursue the path of economic reforms and have to posture that the country is in the Fund programme because being so was for the national interest.
The IMF delegation would be visiting Pakistan next month for Article IV consultations and the things would be manageable during the current fiscal year if there was no external shock on account of oil price hike, global recession and governance reforms in public sector institutions continues.
The government is exploring the option for offering of Sukuk bonds in the domestic market before December 2011 to generate resources to meet the financial needs. Another official said that the government trend was shifting towards borrowing from banks and non-banks sources owing to condition of zero borrowing from the State Bank of Pakistan at every quarter of the fiscal year. He said on the external side the performance was satisfactory during the first three months of the current fiscal year with growth in exports and remittance by 22.7 per cent 17.2 per cent, respectively.