Consequences of massive economic deterioration have started to come on the surface as the summary of consolidated fiscal operation uploaded by the Finance Division on Friday showed an alarming budget deficit to over Rs.5.6 trillion- 51 percent over the preceding year. The government has been unsuccessful to attain the targeted budget deficit for the last fiscal year as the financial year (2021-22) was closed with a deficit of 7.9 per cent against the 6.3 per cent target set in the budget.
Throughout the country’s history, Rs5.6 trillion gap between the federal income and expenditures was the highest.
Budget deficit amounted to Rs1.9 trillion or 51 percent higher than the data recorded in the fiscal year 2020-21 – the third year of the Pakistan Tehreek-e-Insaf (PTI) government. Most of the preceding fiscal year had been covered by the PTI government that remained in office until the first week of April.
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As soon as the coalition government came into power, finance minister Miftah Ismail stated that the budget deficit could rise to Rs5.6 trillion due to massive pending liabilities left by the former government.
The fiscal operations review revealed a Rs197.4 billion discrepancy in the federal government’s records, which is exceptionally huge when compared to the government’s own lax standards.
One of the dominant reasons for the highest ever budget deficit is subsidies of Rs1.53 trillion awarded in the preceding fiscal year, resulting in a Rs1.1 trillion or 260 percent increase in the budget deficit.
Provision of fuel subsidies by the former PTI government depleted government resources and disrupted the International Monetary Fund (IMF) loan programme. Over Rs.1 trillion were paid in subsidies during final quarter of the fiscal year because the previous government had not cleared the subsidy accounts, leaving a challenge for the new government.
The latest fiscal operations summary proved the generally held opinion that the step to announce fuel and energy subsidies just days prior to the dismissal of Imran Khan’s government was unreasonable and unsupported by resources.
The former government had modified the approach and adjusted the base year which was consistent with the best practices worldwide. On the basis of the revised size of the economy, which was projected at Rs67 trillion, the government budget deficit was 8.4 percent of GDP. However, based on old GDP, which was also used to set budget targets in June of last year, the deficit was equal to 10.4 percent of GDP.
Within two months of the National Assembly’s ratification, the current fiscal year 2022-23 budget has become utterly pointless. The results have also cast doubt on the government’s ability to fulfill its commitments to the IMF.