ISLAMABAD: The Fiscal consolidation measures taken by the government have resulted in financial discipline, higher revenues and controlled expenditures, according to Mid-Year Budget Review Report for the fiscal year 2020-21.
The report published by the finance ministry said.“The same strategy will be followed during the remaining period of the CFY (current financial year) to achieve the fiscal sustainability,”
According to the report, the continuity in fiscal consolidation, stable exchange rate, improved current account and better financial management, presents a promising economic outlook.
However, there are certain risks to fiscal sustainability, it said adding that going forward the fiscal position would depend on the domestic and international evolution of Covid-19.
On the other hand faster than anticipated economic revival was likely to increase demand for inputs.
The Finance Division has adopted the facilitative policy of release of funds to meet the expenditures, both re-current and development, in accordance with the government spending priorities.
“Nevertheless, the half year fiscal position indicates that it will remain on track to meet the annual fiscal targets,” the report added.
It is pertinent that this report presents the mid-year comparison of the budgeted and actual Revenues, Expenditures and Financing for FY 2020-21.
On the revenue side, FBR tax collection grew by 5.6 percent during the first half of the Current Financial Year (CFY) on a Year-on-Year (YOY) basis despite an upsurge of Covid-19.
Non tax revenue remained at par with the previous year collection during the same period in spite of reduction in State Bank of Pakistan (SBP) profits and non-realization of fees from cellular license renewals.
Current expenditure was controlled through austerity measures and strict financial discipline, it said however, Covid-related expenditures were made to provide relief and mitigate the impact of the pandemic.
Nevertheless, the increase in the federal net revenue and containment of expenditure limited the federal deficit to 3.1 percent of GDP. Similarly, the current account balance continued to improve, posting a surplus of USD 1.1 billion (0.8% of the GDP) during the first half of CFY.
The government borrowing operations remained quite successful and in line with the Medium-Term Debt Management Strategy (MTDS FY20 — FY23).
Just as in the case of last year, domestic borrowing came entirely from the financial markets and no borrowing was made from SBP.
In fact, an amount of Rs. 285 billion was repaid to SBP during first half of ongoing fiscal year, it added. Furthermore, all borrowing needed to finance the fiscal deficit was made through longer-term debt, while short-term debt (T-bills) reduced by around Rs. 579 billion during this period.
Bloomberg ranked Pakistan’s stock market as the best performing market in Asia while Moody’s rating agency upgraded the country’s outlook to ‘Stable’ from ‘under review for downgrade’.
Fitch affirmed Pakistan’s sovereign credit rating at ‘B-‘ with a ‘Stable’ outlook, and S&P also affirmed our ‘stable’ outlook with a rating of 13′, on the basis of persistent efforts of the government, the report added.