ISLAMABAD: Owing to prudent policies of the government, the fiscal deficit has been brought down to 1.1 percent of Gross Domestic Product (GDP) during the first four months of Fiscal Year 2021-22 against 1.7 percent deficit during the same period last year, official report said.
In absolute terms the overall fiscal deficit has been reduced to Rs587 billion in the first four months of FY2022 from Rs775 billion recorded in the comparable period of last year, according to monthly Economic Update and Outlook for December.
Similarly, the primary balance posted a surplus of Rs 206 billion in July-October FY2022, compared to Rs 156 billion in the same period last year.
It said the fiscal government’s fiscal consolidation efforts were paying off in terms of improved fiscal accounts. “With prudent expenditure management and an effective revenue mobilization strategy, it is expected that the overall fiscal deficit would remain within the reasonable level,” the report said adding that the Federal Board of Revenue (FBR) tax revenues were performing remarkably well and continued to surpass its revenue target during the first five months of the current fiscal year.
It shows that FBR is well on its way to achieve the assigned target for FY2022, it said adding the growth in net federal revenues outpaced the growth in expenditures.
It said, the fiscal accounts have continued to improve reflecting the government’s commitment to prudent expenditure management and effective revenue mobilization strategy.
This is evidenced by the fact that net federal revenue receipts climbed by 17.4 percent to Rs 1205 billion in July-October FY2022, up from Rs1026 billion during the same period last year. A significant rise of 36.7 percent increase in FBR tax and 5.4 percent increase in non-tax collection propelled the growth in government revenues.
Total expenditures, on the other hand, increased by 11.7 percent to Rs 2171 billion in Jul-Oct FY2022, compared to Rs 1943 billion last year. The increase has been witnessed owing to 8.5 percent increase in current expenditures and 55.6 percent growth in PSDP spending.
The report mentioned that various tax reforms were underway to improve the documentation and maximum taxpayer’s facilitation that would further improve the tax collection and support in achieving the target set for the current fiscal year.
The report said that during the first four months of the current fiscal year, the country remained on a higher growth trajectory, accelerating from the growth rate observed in FY2021.
It said, the inflation might ease out in the coming months due to the declining commodity prices in the global market.
In addition, relief may also come from continuous government efforts to soften food prices in the local markets by following appropriate fiscal and monetary policies.
While these developments and policies may keep the monthly price dynamics in check, the current stress on the trade balance is expected to soften, easing exchange rate pressure and subsequently stabilizing the month-on-month inflation, it added.
According to the report, they country’s economy had recovered after better performance at coping with the Covid-19 pandemic and resulting constraints.
Furthermore, despite the spread of omicron variant, the cyclical position in the main trading partners as witnessed by the Composite Leading Indicators (CLI) remained above 100.
“But we should also not ignore the impending risks including the concerns of the policy makers about the inflationary effects and the resulting policy response,” it cautioned.
The growth momentum remained intact with the government’s pro-growth policies. The trend of high frequency variables is encouraging and it is expected that the economy will achieve its growth target.
On world economy, the report said, the latest Omicron mutant of the coronavirus has clouded the world economy with uncertainty.
The spread of omicron has forced economists across the globe to cast a shadow of doubt on the ongoing global economic growth recovery.
It said, the new variant coupled with global inflationary pressure were the key concerns and making the economic outlook more difficult.
It said, the global energy prices for the month of November 2021 declined by 6.4 percent, while non-energy prices fell by 0.2 percent as compared to October 2021