Consolidated fiscal deficit going to touch all-time high

The consolidated fiscal deficit is going to touch an all time high for fiscal year just past largely because of election specific spending spree by the federal and provincial governments, it was learnt.
A top official of Finance Ministry said that Rs128 billion provincial budget deficit instead of the budgeted surplus of Rs90 billion has sent yet another shock wave to the economic managers subsequent to Federal Board of Revenue (FBR) collections which were less than budgeted. This would increase the consolidated fiscal deficit by around one percent for last fiscal year. High ups of Finance Ministry have put their heads together to limit the consolidated budget deficit to around 8.5 percent, including 1.9 percent one time consolidation of electricity arrears and commodity operations. According to the official the budget deficits of Punjab and Sindh governments - each above Rs50 billion - were unexpected and is being attributed to election specific spending by the provinces.
Analysts say that a massive budget deficit was simply a reflection of unrealistic projections of revenue and expenditure by the economic managers in the budget. Higher than budgeted non development expenditure and lower than budgeted revenue collections have led to higher government borrowing domestically which has not only crowded out private sector borrowing but also spiked inflation. They further revealed that banks now prefer to lend money to the government, with its sovereign guarantees, rather than the private sector.
Sources in the Finance Ministry said that FBR, which heavily relies on withholding agents for revenue collection, has letdown the economic managers in meeting the targeted revenue collection. The total revenue collection of Rs1881 billion for the fiscal year 2011-12 is Rs71 billion less from Rs1952 billion budgeted for last fiscal year and excludes Rs25 billion collection by the Sindh Board of Revenue (SRB). Limiting fiscal deficit to 6 percent would be impossible for the federal government in the current fiscal year unless provinces demonstrate some fiscal discipline in the wake of 7th National Finance Commission (NFC) Award, the official added.
Shortfall in revenue collection by the FBR as well as Rs128 billion provinces' budget deficit has made the job challenging for the economic managers to limit consolidated fiscal deficit to all time 8.5 to 8.7 percent of the GDP.