• Pakistan’s fiscal balance in the current fiscal year to date has strengthened over prior year, with the deficit arriving at PKR 1.65trn in 9MFY21 (3.6% of GDP) compared to PKR 1.69trn in 9MFY20 (3.8% of GDP), down by 2% YoY. Moreover, the primary surplus during the period at PKR 452bn (1.0% of GDP in 9MFY21) fares better compared to a primary surplus of PKR 194bn witnessed last year (0.4% of GDP).
• Primarily, total revenue growth at 6% in 9MFY21 to PKR 5.0trn (9MFY20: PKR 4.7trn) aided the fiscal balance, translating into 11.0% of GDP vs. 10.7% last year. The total tax revenue collection has gone up by 5% YoY to PKR 3.8trn. Indirect taxes (+13% YoY to PKR 2.15trn), sales tax (+14% YoY to PKR 1.42trn), and direct taxes (+9% YoY to PKR 1.25trn amid higher number of tax payers), contributed to the overall collection.
• In addition, the government collected PKR 1.17trn in non-tax revenues, displaying a jump of 13% YoY. This was particularly owed to imposition of Petroleum Levy, which is now classified under non-tax revenue (+86% YoY | PKR 369bn). On the flipside, the surplus profit of State Bank of Pakistan and Pakistan Telecommunication Authority declined during 9MFY21 to PKR 498bn (-22% YoY) and PKR 20bn (-82% YoY), respectively.
• In addition, total expenditures went up by 4% YoY to PKR 6.6trn (14.6% of GDP vs. 14.5% of GDP in 9MFY20). Further breakup revealed that current expenditure underwent an uptick of 8% YoY of which markup payments rose by 12% YoY. On the contrary, the defence expenses went down by 2% YoY to PKR 784bn. Moreover, development expenditure and net lending undertaken by the government declined by 7.5% YoY to PKR 723bn.
• Total PSDP expenditure in 9MFY21 arrived at PKR 654bn (-9% YoY) with provincial expenditure at PKR 390bn, outdoing federal disbursement of PKR 264bn.
Decline of 26% YoY in deficit during 3QFY21
• We also highlight that cumulatively all four provincial governments recorded an overall balance of PKR 413bn during 9MFY21, compared to PKR 344bn recorded in the corresponding period last year, marking a 20% increase. However, Sindh and KPK recorded a decline of 10% YoY and 70% YoY, respectively.
• Pertinently, budget deficit during 3QFY21 settled at PKR 514bn (1.1% of GDP), depicting a decline of 26% YoY vis-à-vis PKR 691bn during 3QFY20.
• Total revenues of the government in 3QFY21 arrived at PKR 1.64trn (3.6% of GDP), up by 13% YoY from PKR 1.46trn during 3QFY20.
• FBR taxes increased by 25% YoY to PKR 1.18trn due to 15% YoY rise in direct taxes to PKR 416bn in 3QFY21 whereas collection from sales tax and indirect taxes went up by 30% and 39% YoY to PKR 498bn and PKR 769bn, respectively.
• Total expenditure in 3QFY21 clocked in at PKR 2,156bn (4.7% of GDP), up 0.3% YoY over the same period of last year (PKR 2,149bn; 4.9% of GDP) with a 9% rise in defense expenditure to PKR 297bn and 9% uptick in current expenditure to PKR 2.1trn.
Courtesy – AHL Research