ISLAMADAB: Fiscal deficit is going to touch 8.5 percent for 2011-12 mainly due to failure of the provinces to generate budget surplus, no disbursement of the revised estimate of Coalition Support Fund (CSF) inflow and inability of the Federal Board of Revenue (FBR) to meet the projected revenue target, it is learnt.
A top official of the Finance Ministry said the latest figures indicate an overall provincial budget deficit instead of the revised Rs 90 billion budget surplus as noted in the budget documents 2012-13 - as opposed to the original budget estimate of Rs124 billion. Thus budget deficit for 2011-12 inclusive of 1.9 percent for consolidation of arrears on electricity and commodities would be around 8.5 percent.
The economic managers frequently revised the fiscal deficit estimate upward during last fiscal year. In May 2012, fiscal deficit was revised upward from 4.7 percent to 5.5 percent after provincial governments made it clear that they would be unable to generate the budgeted surplus of Rs124 billion but would generate a surplus of Rs 90 billion.
Additionally, the government took account of the failure to auction off 3G license that was estimated to have netted around Rs 75 billion when determining the 5.5 percent budget deficit.
However three other revenue sources failed to materialise during last fiscal year, identified by the official as: (i) Rs 90 billion provincial surplus which was revised into a deficit at the end of the year, (ii) Rs75 billion on account of CSF was not disbursed, and (iii) Rs 1952 billion projected as revenue from the FBR suffered a shortfall of around Rs 45 billion.
As a result, the revised fiscal deficit target would be missed by one percent which would touch 6.5 percent for 2011-12, exclusive of 1.9 percent on account of consolidation of arrears on electricity and commodities. This deficit implies that the government would borrow Rs1.705 trillion from the banking and non-banking system to finance the budget deficit thereby completely crowding out the private sector, critical for growth.
An official said magnetisation of fiscal deficit would further spike inflation which may compel the regulator to increase interest rate which, in turn, would further act as a deterrent to private sector borrowing and put further pressure on savings and investment.