ISLAMABAD - The government has restricted the budget deficit to Rs1.37 trillion mainly due to the healthy growth in tax collection and surplus provincial budgets in first half (July to December) of the current fiscal year.
Pakistan’s budget deficit – the gap between federal income and expenditures – was recorded at Rs1.37 trillion (2.1 percent of the GDP) during July to December period of year 2021-22. Budget deficit was 2.5 percent of the GDP during the same period of the previous year. Primary balance, which is the difference between government’s revenue and its non-interest expenditure, was recorded in surplus of Rs81.07 billion.
The government has controlled the budget deficit due to massive growth in tax collection. The Federal Board of Revenue (FBR) had surpassed the tax collection target by Rs287 billion. The FBR collected Rs2,920 billion during July-December period of current Financial Year 2021-22 and had exceeded the target of Rs2,633 billion by Rs287 billion.
Pakistan’s overall expenditures were recorded at Rs5.3 trillion in first half of the ongoing fiscal year as against the revenues of Rs3.96 trillion, leaving deficit at Rs1.37 trillion. According to the ministry of finance, the government has increased its expenditures under grants and subsidies. In particular, under grants, government spending is focused on social protection (BISP & poverty alleviation) and COVID 19 (vaccine procurement). Meanwhile, subsidies to the power sector have also witnessed a sharp rise during the period under review. Thus, an increase in both grants and subsidies has been attributed to a significant rise in current expenditures. With the start of the 5th COVID wave driven by the Omicron variant, the expenditure side may come under further pressure. 
The government of Pakistan had set the budget deficit target at Rs3.4 trillion (6.3 percent of the GDP) for the current fiscal year. However, the ministry of finance’s warning of increase in expenditures might dent the government’s efforts to restrict the deficit at Rs3.4 trillion by the end of current fiscal year.
In expenditures, interest payment has once again increased massively, as it cost Rs1.452 trillion. The government has paid interest worth of Rs1.312 trillion on domestic loans and Rs140.35 billion on foreign loans. In 2021-22, the government would pay Rs3.06 trillion as interest payment. Meanwhile, defence spending has remained at Rs520.5 billion, which is 38 percent of the overall annual defence budget, Rs1370 billion. The spending on development expenditures including federal as well as provincial remained at Rs565.4 billion in July to December period of the year 2021-22. In other expenditures, the government has paid Rs251.7 billion as pension payment, Rs209.9 billion on running of civil government expenditures, Rs313.4 billion as subsidy and Rs548.9 billion as grants to others. 
Of the total revenues of Rs3.96 trillion, the government collected around Rs715.11 trillion as non-tax revenues during the first half of the FY2022. In non-tax revenues, the government had collected Rs32.6 billion as mark-up on public sector entities, Rs25.97 billion as dividend, Rs380 billion as surplus profit of the State Bank of Pakistan, Rs38.88 billion as profit of Pakistan Telecommunication Authority (PTA), Rs7.7 billion as defence, Rs10.4 billion as passport fee and Rs7.588 billion as discount remained on crude oil, Rs39 billion as royalties on gas and oil, Rs5.147 billion as windfall levy against crude oil and Rs46.7 billion through other sources. The four provincial governments recorded budget surplus of Rs480.77 billion during July to December period of FY2022, as their expenditures remained at Rs1.755 trillion as compared to the revenues of Rs2.235 trillion. The government had budgeted provinces to give budget surplus of Rs570 billion during current fiscal year.