ISLAMABAD: The fiscal deficit during the first month of the current fiscal year (FY2022-23) has been contained at 0.3 percent against the deficit of 0.4 percent recorded during same month of last year, according to latest report of finance ministry.
The primary balance during July FY2023 posted a surplus of Rs 142 billion against the deficit of Rs 5 billion in July FY2022, says ‘Economic Update and Outlook for September 2022’ released by finance ministry here on Friday.
According to the report, the net federal revenues in July FY2023 increased by 9.3 percent to Rs 229 billion against Rs 209 billion in the same period last year while the total expenditures increased by only 3.7 percent to reach Rs 536 billion in July FY2023 compared to Rs 517 billion in the same month last year.
Within the total, current expenditures increased by 8.0 percent to Rs 531 billion in July FY2023 as compared to Rs 492 billion in the same period last year, it added.
According to the report, for FY2023, the fiscal deficit had been budgeted to reduce to 4.9 percent of GDP, while the primary balance is a surplus of Rs 153 billion.
The budget for FY2023 was prepared to achieve the goals of stabilizing economic growth, increasing revenues, rationalizing expenditures through prudent expenditure management, enhancing exports, and protecting the vulnerable segments of society through relief measures and pro-poor initiatives.
However, the economy of Pakistan has been affected severely by widespread destruction brought by extreme flooding. Consequently, there will be a detrimental impact on the government’s fiscal situation from both the revenue and expenditure sides, it adds.
According to the report, in the backdrop of international price hike and recent exceptional floods, the economic outlook for Pakistan in the current fiscal year (2022-23) is likely to remain below the target.
“The economic outlook for Pakistan in the current fiscal year has become uncertain and will likely remain below the target,” says the report adding the macroeconomic imbalances may ease with the expected slowdown in the economic growth.
It says, in March 2022, international oil and food prices broke out the upper bound of the margins observed in the last two decades, which impacted significantly inflation in Pakistan.
“Even if international commodity prices would mean-revert in the near future, domestic inflation may still suffer from delayed adjustments and second round effects. Also, the depreciation of the rupee continues to exert upward pressure on domestic prices,” it says.
At the same time, recent exceptional floods have destroyed human, physical, and livestock capital and deprived many families of their assets and incomes. Besides the cost in terms of lost lives and capital, these events will certainly affect the creation of gross value added and hence economic growth.
The growth was already under pressure due to unstable economic conditions in the rest of the world and due to the necessary fiscal consolidation, high rates of interest, and inflation.