ISLAMABAD   -  Pakistan budget deficit is expected to touch record Rs2.7 trillion in current fiscal year mainly due to massive shortfall in tax collection and increase in interest payment. The country’s budget deficit would widen to Rs2.7 trillion in the current financial year, which would be equal to 7 percent of the gross domestic product (GDP).

The budget deficit would be highest ever by exceeding the previous level of Rs2.24 trillion. Earlier, the government had revised upwards the target of the budget deficit to 6.3 percent of the GDP (Rs2.39 trillion) for the ongoing fiscal year as against the target of 5.1 percent of the GDP.

Now, the deficit is expected to jump to 7 percent of the GDP. The two mini budgets had failed to control the increasing budget deficit during ongoing fiscal year. The deficit is widening due to shortfall in tax collection and increase in interest payment and security expenditures. The Federal Board of Revenue (FBR) is struggling to achieve the tax collection target. The FBR has collected Rs2.995 trillion in taxes as against Rs3.35 trillion ten-month target, showing shortfall of Rs345 billion. The FBR is unlikely to achieve the annual target of Rs4398 billion by the end of current financial year.

On the other hand, the expenditures are rapidly increasing. The government had revised that interest payment would cost Rs2 trillion. The ministry of finance had upward revised the interest payment on foreign loans due to the depreciation in local currency. Initially, at the time of budget for current fiscal year, the government had earmarked Rs1.62 trillion for interest payment for the current fiscal year.

However, the government would have to pay additional Rs380 billion on interest payment only due to rupee depreciation. Dollar value had touched historic level of Rs142 last month as against Rs115 in April 2018 when the annual budget for ongoing fiscal year was prepared.

Similarly, the defence expenditures are projected at Rs1.68 trillion including expenditures of defence services, pensions, SPD and special packages during the period under review. The government had slashed the development budget to control the soaring deficit. The government has planned to further cut the Public Sector Development Programme (PSDP) by Rs100 billion during the current financial year. Earlier, in September 2018, the government revised the development budget to Rs675 billion for the year 2018-19 from the total budgetary allocation of Rs800 billion. However, the federal government has informed the provinces that it would release only Rs575 billion for the development sector.

Pakistan’s budget deficit was recorded at one trillion rupees during first half (July to December) of the current fiscal year. The country’s expenditures stood at Rs3.36 trillion as against the revenues of Rs2.33 trillion during the first half (July to December) of the ongoing fiscal (FY2019) year.

The budget deficit was recorded at Rs1.03 trillion (2.7 percent of the GDP), according to the latest data of ministry of finance. The government is struggling to restrict the budget deficit despite introducing two mini budgets in last six months.