THURSDAY MAY 31: Budget 2012-13: fiscal deficit upwardly revised to 4.9 percent

ISLAMABAD: The government has upwardly revised fiscal deficit projection for the next fiscal year to 4.9 percent from 4.2 percent owing to highly anticipated higher expenditure on subsidies for power sector, increase in salaries as well as expenditure on a special programme outside the pale of Public Sector Development Programme (PSDP) for election-related expediency, it was learnt.
Sources said that the fiscal deficit for 2012-13 was originally estimated at 4.2 percent of the GDP in the Budget Strategy Paper. However, it had now been revised upward to 4.9 percent to accommodate an additional expenditure of Rs 161 billion in an election year. An official reportedly said that Rs 100 billion was going to be utilised for the development projects under a special programme outside the Public Sector Development Programme (PSDP). The increase in the fiscal deficit would allow the government to take some populist measures and initiate development spending in the constituencies of PPP-led coalition's candidates. According to that official, the National Economic Council (NEC) has already increased the size of development budget to Rs 360 from Rs 350 billion proposed by the Annual Plan Co-ordination Committee (APPC). The allocation of subsidies in the next fiscal year budget has also been revised upward to Rs 150 billion from projected Rs 120.
The country's economic managers have also been mindful of the increase in salaries of public sector employees while revising the fiscal deficit upward for the next fiscal year. An official who has been involved in the budget-making process said that various proposals had been prepared with respect to increase in salaries to be presented before the Cabinet meeting that would take place ahead of the budget announcement. "We are unsure about the exact increase in salaries because a decision to this effect is usually taken by the political leadership in consultation with coalition partners during the Cabinet meeting," he said.
However, he said that more than 10 proposals suggesting various options had been prepared and an increase of five percent in pay and pension of over 600,000 employees of federal government would have an impact of around Rs 11 billion on the budget. The official said that an estimated allocation of Rs 240 billion for federal government service delivery would have to be revised upward if the federal cabinet decided to give a raise in salaries greater than the one estimated by the economic managers. He said that an amount of Rs 118 billion was allocated for federal government service delivery in the budget for the current fiscal year, which had been increased to Rs 240 billion for the next fiscal year - 10.09 percent more than the allocations for 2011-12.