Low uplift spending: fiscal deficit revised downward, Cabinet told

The federal Cabinet was informed that fiscal deficit for the current fiscal year has been revised downward to 5.7 percent from the budgeted 6.3 percent, largely because of a significantly less than budgeted development spending by federal and provincial governments. Sources said the Finance Minister informed the Cabinet during a recent briefing on budget strategy papers for next three years that the fiscal deficit for the current fiscal year has been reduced to 5.7 percent.
The Finance Ministry has revised the fiscal deficit target in spite of decline in tax-to-GDP ratio to 10.5 percent for the current fiscal year from budgeted target of 10.9 percent. The meeting was further informed that fiscal deficit for the subsequent two years - 2014-5 and 2015-16 - has been projected at 4.8 and 4 percent, respectively. Sources said the government anticipates a substantial surplus in budget surplus from provinces on the basis of their fiscal operations and low development spending during July-March 2013-14. The downward revision of 0.6 percent in fiscal deficit for the current fiscal year implies that the government would either mobilise additional revenue of Rs 156 billion or reduce expenditure in proportion or an amalgam thereof. The government has already revised the revenue target downward twice - from Rs 2,475 billion to Rs 2,275 billion - and at the same time has been compelled to increase subsidies to power sector. This effectively implies a major slash in development spending both at the federal and the provincial levels, analysts maintain.
Another senior official also cited what seems an unusual budget surplus of Rs 214 billion by provinces during July-March 2014 with Rs 62 billion by Punjab, Rs 58 billion Sindh, Rs 53 billion Khyber Pakhtunkhawa and Rs 41 billion by the Balochistan. This helped the Finance Ministry limit the fiscal deficit to 3.1 percent and accounted for one percent surplus by provinces in spite of lower transfers from the divisible pool. The official further argued that provinces may have been unable to utilise the federal transfers for development expenditure due to the delay in their release by the federal government.