ISLAMABAD: The fiscal deficit during the first two months of the current fiscal year (Jul-Aug 2022) was recorded at 0.9 percent of the GDP, the same as in the comparable period of last year, stated the Finance Ministry on Thursday.
Monthly economic update and outlook for October 2021 released by the Finance Ministry; however, noted that in absolute terms, fiscal deficit stood at Rs462 billion for the first two months of the current fiscal year compared to Rs415 billion for the same period a year before.
The primary deficit during the first two months of fiscal year2022 showed a deficit of Rs37 billion, compared to a surplus of Rs69 billion in the comparable period last year, while net revenue receipts increased by 7.1 percent to Rs470 billion, compared to Rs439 billion last year.
The increase in the Federal Board of Revenue (FBR) tax collection during the period under review contributed significantly to the increase in revenue receipts. And public sector development programme (PSDP) spending increased by 18.9 percent to Rs63 billion in Jul-Aug 2022, compared to Rs53 billion in the same period of last year.
Agriculture credit disbursement (provisional) during July-September 2022 with 14.7 percent was recorded at Rs291.9 billion from Rs254.6 billion for the same period of last year, credit to private sector (flows) was recorded at Rs175.8 billion during (July-1st Oct 2021-22) compared to negative Rs123.1 billion (1st July to 2nd October 2021).
Rs2.983trn fiscal deficit financed through domestic debt
The economic recovery, which accelerated since March 2021, is expected to continue on account of strong growth in agriculture (important and other crops) and manufacturing sectors.
Revival of domestic economic activities remained on track; however, risk of inflationary pressure persists on account of both demand and supply conditions, the economic update prepared by the Economic Adviser Wing of Finance Ministry further noted.
The persistent rise in international oil prices, exchange rate pressure and the rise in domestic economic activities are contributing in rising import demand, and given these recent dynamics, it can be expected that in the coming months, imports may remain at the current high level.
The performance of commodity producing sector will accelerate activities in the services sector through multiplier effects after the government has lifted Covid-related restrictions following decline in the Covid-19 cases and higher vaccination.
All these developments will further stimulate the confidence of economic agents.
The economic expansion may go along with a current account deficit.
If remittances stay roughly at the current levels in the coming months, then taking into account the other income inflows having relatively minor share, the current account deficit would be driven by the trade deficit, which will be stabilised and improved thereafter. Additionally, measures are underway to curb the trade deficit at manageable level to ensure the external sector stability.
As long as the deficits are financeable, their contribution remains productive for developing countries in achieving the higher growth trajectory, necessary for the convergence of their per capita incomes with developed countries. Exports of goods and services crossed the $3 billion mark due to strong economic recovery in Pakistan's main trading partners.
Copyright Business Recorder, 2021
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