ISLAMABAD: While the budget deficit has increased to 1.7 percent of the GDP during the first four months (July-October) of the current fiscal year compared to 1.4 percent for the same period a year before, the Ministry of Finance (MoF) said that the effects on the economic outlook would depend on the intensity of the COVID-19 pandemic and duration of restrictions.
The Monthly Economic Update and Outlook for December 2020 disclosed that overall fiscal deficit during July-October fiscal year 2020-21 stood at 1.7 percent of GDP (Rs753 billion) against 1.4 percent of GDP (Rs564 billion) in the comparable period of last year. However, primary balance has posted a surplus of Rs178 billion (0.4 percent of GDP) during the period under review against the surplus of Rs130 billion (0.3 percent of GDP) for the same period of fiscal year 2020.
The ministry stated that the primary surplus has recorded an increase of 37 percent during the period under review.
The Federal Board of Revenue (FBR) tax collection stood at Rs1,688 billion during July-November 2020-21 compared to Rs1,623 billion for the same period a year before.
A decline of 5-5 percent was recorded in non-tax revenue to Rs429 billion during July-October 2020-21 as opposed to Rs454 for the same period a year before.
On the expenditure side, there was an increase of 13.5 percent as federal expenditures increased to Rs1,920 billion during July-October 2020-21 against Rs1,691 billion for the same period a year before.
While the recovery from shocks is underway and promises strong growth in the current fiscal year, the main risk factor to this scenario is the recently observed resurgence of new waves of infections world-wide and also in Pakistan, necessitating imposition of new restrictions on social contacting that may impact on the economic expansion.
The effects on the economic outlook will depend on the intensity of pandemic and duration of restrictions.
But specific, well-designed government policies both domestically as well as in Pakistan’s trading partners may soften the economic burden of these necessary restrictions.
The large scale manufacturing (LSM) has started to rebound after the havoc caused by the Covid-19 and during July-October fiscal year 2020-21 grew by 5.5 percent from -5.5 percent for the same period a year before, the ministry said, and added agriculture disbursement stood at Rs357.8 billion during July-October from Rs347 billion, however, credit to private sector was negative by Rs15 billion from July 1 to December 6, 2021 against Rs79.2 billion for the same period of the last fiscal year.
A growth of 26.9 percent was recorded in remittances during July-November 2021 to $11.8 billion as compared to $9.3 billion a year before.
According to the economic update, there was a decline of 7.1 percent in exports as exports stood at $9.6 billion during July-November 2021 as opposed to $10.3 billion for the same period a year before, while imports after a decline of one percent stood at $18.1 billion against $18.3 billion during the period under review.
As a result, trade deficit widened by 6.9 percent.
The Foreign Direct Investment increased to $317.4 million in October 2020-21 from $126.5 million for the same month a year before.
Copyright Business Recorder, 2020
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