Expenses up, development spending down

The government has increased current expenditure by Rs 299 billion, reduced development spending by Rs 253 billion for the on-going fiscal year, which economist believe is mainly to meet the expenditure being incurred on war against terrorism, following non-materialisation of pledges by the Friends of Democratic Pakistan (FoDP).
The Finance Ministry has revised total revenue as well as expenditure budgetary targets for the on-going fiscal year by increasing total revenue from Rs 2155.4 billion to Rs 2187 billion. The target of total expenditure was increased from Rs 2877.4 billion to Rs 2913 billion. The current expenditure was increased from Rs 2103.8 billion to Rs 2403 billion for the on-going fiscal year.
The fiscal policy statement by Ministry of Finance showed that development expenditures have been reduced from Rs 763.1 billion to Rs 510 billion to meet the increasing spending on terrorism war. Sources in the Ministry of Finance said that they are expecting $1.8 billion external inflows in the current fiscal year to keep the fiscal deficit at a reasonable level. However, non-materialisation of the expected external inflows would make the task difficult.
The reason of higher fiscal deficit in the statement was attributed to much lower than expected external inflows during the first quarter "Originally, the targeted Rs 159 billion was to be financed mostly through external inflows of Rs 100 while the remaining deficit was to be met from domestic bank (Rs 32 billion) and non-bank sources (Rs 28 billion). However, the first quarter deficit reached Rs 223.7 billion and the expected external inflow did not materialise.
Finance Minister recently told a news conference that total unbudgeted burden was Rs 310 billion-Rs 170 billion in the shape of additional security expenditure, Rs 85 billion on account of electricity companies, Rs 20 billion in additional support to the textile industry, Rs 10 billion for Railways and Rs 25 billion for the Utility Stores Corporation. According to Tarin the budget deficit might go up to 5.3 percent of the GDP, Rs 800 billion, instead of targeted 4.9 percent or Rs 722 billion.
The fiscal policy statement showed that to minimise the fiscal gap the revenue target for the on-going fiscal year was also increased from Rs 1563.3 billion or from 10.5 percent of the GDP to 10.7 percent of the GDP. The FBR revenue was also increased from Rs 1380 billion to Rs 1396 billion for the period.
Pakistan is dependent on external flows to keep its fiscal deficit within the target, but very slow materialisation of $5.7 billion promised by FODP last year and increasing cost on law and order might make the task difficult for the economic manager, say economists.